USDA’s supply and demand report today doesn’t help make the future look any brighter.
It’s no surprise that it predicts enormous corn and large soybean stocks by August 31, 2011. Everyone expects huge crops in the U.S. this year as an early spring allows acres to be seeded pretty much as farmers want them seeded. Still, seeing USDA’s numbers is sobering.
USDA is predicting ending corn stocks for the next crop year at 1.8 billion bushels – the most since 2005-06 – and ending stocks for soybeans at 365 million bushels – the most since 2006-07. It also predicts that the world will produce a record corn crop this coming year, so there isn’t likely to be relief from overseas.
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Corn sets the price base for the cereal grains, so that’s why it’s important for Canadian wheat, oats and barley prices. Soybeans set the price base for canola. Various grains and oilseeds can diverge from these two giant crops, but their degree of divergence is limited as buyers can become very inventive with substitution if anything gets too far out of whack.
Joe Victor of Allendale Inc. in Illinois said he still thinks there’s room for spring rally price increases until the July 4 weekend, then prices will likely settle lower barring weather scares. The most bearish element facing the grain and oilseed markets this year is the early spring seeding, which is allowing American farmers to get their crops planted early enough to avoid them pollinating and filling during the most brutally hot periods of the Midwest summer. Often the great yield limiter for American crops is the scorching heat of midsummer, and this year that limiter will itself be limited. There’s little to stop American crops being huge this summer, so Victor expects weak markets after planting all the way to December.
