Drought, Heat Destroying Food Crops

Fired by fresh worries about drought, corn powered up 34 cents per bushel on the Chicago Board of Trade to $7.08, above $7 per bushel for the first time in a year.
Soybeans climbed 53 cents per bushel to an all-time high of $15.27.
The gains in Iowa’s mainstay crops have been breathtaking as farmers and traders factor in their fears that the heat and drought in Iowa and elsewhere in the corn belt will take yields down far below expectations.
As recently as June 1, corn traded for $5.20 per bushel and soybean at $12.50 per bushel on expectations of big crops that would increase U.S. domestic stocks and also moderate what has been a two-year record run of corn and soybean prices.
The U.S. Department of Agriculture has forecast a national corn yield of 166 bushels per acre and a soybean yield of 44 bushels per acre. Iowa’s yields historically are about ten percent above the national averages.
But private forecasters have cut their yield predictions for corn to as low as 148 bushels per acre and soybeans below the USDA projections.
Corn

 Soybeans -- new all-time record high

 Wheat

Grains Skyrocket in Anticipation of USDA Report, News of Russian Grain Export Limits

from the Demoines Register:
With a crucial U.S. Department of Agriculture report looming tomorrow morning, corn prices have shot up unexpectedly by 34 cents per bushel this morning on the Chicago Board of Trade to $6.39 per bushel for the December contract.
Soybeans are up 48 cents per bushel to $12.26.

from Agrimoney:

Grain prices spiked after Russia revived plans for grain export duties amid fears that its surging pace of shipments would deplete inventories.

Viktor Zubkov, the Russian deputy prime minister who in June voiced proposals for a levy, said on Tuesday that the government was considering reviving the plan to prevent its grain stocks falling below 15m-16m tonnes.

While Russia has seen a sharp revival in its grains production from last year's drought-affected levels of 61m tonnes - with Mr Zubkov pegging the harvest at 90m-92m tonnes and Prime Minister Vladimir Putin last week estimating the crop at 95m tonnes – keen prices have seen a surge in supplies leaving the country.

USDA Crop Reports Slashes Corn Crop

With the Wednesday, February 9th, mornings’ release of the USDA Monthly Crop report, the grains futures markets all closed higher, primarily on fears that the Corn supply is at a lower than anticipated level.  In even the most basic understanding of economics, low supply equated to higher demand.  Couple that with other reports such as the USDA raising their estimate of corn used for ethanol production by 50 million bushels to 4.95 bb – and you have the perfect storm for Corn Futures to raise by as much as their exchange allows.  Even after some settling, Corn Futures ended trading at a high that hadn’t been attained in over 2 years.

Although corn reports weren’t the only factors involved (weather concerns were some for wheat), the grains markets across the board looked green like this (click on the Ticker symbol to have a chart pop up in a new window):

Grain Stocks Paper Thin

from various tweets regarding the USDA's grain report this morning:

US soybean stocks at 140 mln bu equates to a 15.2-day supply - the tightest of the past 40 years!

China buys 40k tons US soyoil 

USDA's tight soybean stocks est was only achieved by "assuming" that prices would ration beans available for domestic crush 

Global corn stocks fall to just a 55.4-day supply; 2nd tightest of past 35 years; 2nd only to 54.9-day supply 4 yrs ago

Today's USDA #s are bullish long-term, altho we could see profit taking if buying int wanes today

Today's USDA data means that corn needs 93 mln and soybeans need 79 mln acres w little margin for bad weather

USDA tightens stocks leaving no room for error in next season's plantings and will require rationing of ethanol demand

from Futures Knowledge:


Cotton prices ended the day limit bid and are trading near limit gains this morning.  The USDA January supply/demand report was supportive for cotton but was quite bullish for grains and soybeans which is causing cotton to rally.  For the US, USDA raised US production of cotton by 50,000 bales to 18.32 million bales. Raised Use by 100,000 bales to 3.6 million and left exports at 15.75 million bales. And left ending stocks at 1.90 million bales.  For the world, USDA lowered production by 70,000 bales to 115.46 million bales, raised World Use by 280,000 bales to 116.58 and reduced World ending stocks by 550,000  bales which puts them at 42.84 million bales.  Whenever world ending stocks are reduced it is bullish on its face. The USDA left production unchanged in Australia, India, and China though they are likely to lower those estimates later. They raised Brazil’s production by 100,000 bales to 8.2 million. USDA raised India’s cotton consumption by 500,000 bales to 21.5 million. USDA lowered soybean ending stocks by 25 million bushels to 140 million. USDA lowered wheat ending stocks by 40 million bushels to 818 million.  USDA lowered corn ending stocks 87 million bushels to 745 million.  Today, the US Dollar Index is down 38 points at 80.75. Crude oil is up 55 cents at $91.65. March soybeans were up 14 cents overnight at $13.71. March corn was up 5 1/2 cents overnight at $6.12 ½. July wheat was up 11 ½ cents overnight at $8.19 ¾. China’s cotton futures and forwards were higher overnight.

Corn Limit Down in Bearish Blow-Out

All the grains are down after the USDA's crop forecast indicated better 2009 harvest almost across the board.

Impact of Upcoming USDA Report on Prices

Over the past few days, grain prices have been quite bearish in anticipation of this morning's USDA report of this past falls' harvests.

USDA Crop Report Leads Corn to Limit Down

The USDA crop report issued this morning has surprised grain traders with a more rosey grain production forecast that was expected. See the corn chart and limit down price above. Traders are taking it somewhat with a grain of salt, however, because the survey was conducted and the results were tabulated before much of the recent corn yield destruction that occurred due to the recent flooding across the grain-growing regions of the United States. Consequently, the grains have opened lower across the board and the price of corn has touched limit down in early trading. I expect at least a partial rebound, depending upon how strong the sell-off is, especially since more rain and broken levees over the weekend are likely to provide some price support for grains. However, I am short for now.

Soybeans
Wheat

Grains Relatively Quiet Today

Grains trading today was relative subdued, with little news and many traders awaiting the FOMC minutes. Tomorrow should show very active trading with another USDA report due out before the days session opens tomorrow.

USDA Report on Prospective Crop Plantings

Corn -- less than anticipated (bullish for prices)
Expected: 87,700
USDA estimate: about 86,000

Soybeans -- more than anticipated (bearish for prices)
Expected: 71,800
USDA estimate: about 74,800

Wheat -- about as expected

Bloomberg article link

Late planting due to wet weather in the Midwest also favors increased soybean acreage over corn, since soybeans can be planted later than corn. Continued rainy forecasts will be more likely to increase soybean acreage at the expense of corn acreage even more than the USDA forecast.

USDA Crop Report Coming Up 3/31

The USDA acreage report will be issued next Monday, March 31st. This will set the tone for trading next week, since it will give traders a very good idea of what to expect from the growing season this year. I expect trading to be extremely volatile that day, with a strong likelihood of lock limit prices being reached. It also tends to mark the point at which weather will play a large role in trading throughout the growing season. I'm looking forward to this with eager anticipation!

Wheat: USDA Says Stocks at 60-Year Low

From the CME website this morning:

"tightness is expected to persist with the USDA pushing ending stocks to a 60-year low".

U.S. grain stocks are at60-year lows! Note since World War II has grain in storage been so low in the United States! I hope you have some grain in storage, or you may soon not be able to eat! That sounds very bullish for wheat prices long-term.

On the other hand, the CME website also conveys a somewhat bearish sentiment for soybeans. Of course, as it says in Mark Douglas' book, "Trading in the Zone", one of the five fundamental truths of trading is that "anything can happen".