First, according to most traders there is a belief old crops stocks are too tight. Although I haven't heard of anyone having too much trouble finding the grains they want to feed (hay yes, grains, no) US sellers aren't knocking down doors at grain buyer's offices wanting to unload large quantities of grain. This is helping to fire up the perception of tight stocks for old crop corn and soybeans in the US. It will be interesting as we end the month of June and begin July if US farmers don't open up bins and start to sell.
No doubt the US had drought reduced crops last year but US farmers also made a fair amount of money selling cash grains, from federal crop insurance and other subsidies. Actually, for many farmers it was the best year ever. Many US producers sold grain up to the point last year where they could use expenditures to keep from paying taxes and stored the remainder grain. Now like many years after planting and the costs it takes to plant, farmers are pinched for cash. Also farmers are no different than people far removed from rural America. They have everyday living expenses. The days when the majority of farmers grew what they eat are long gone. When the family sits down at supper on the farm or in the city, the supermarket doesn't give a discount to the farmer. Housing costs may be cheaper in rural America, but a farmer's son or daughter wanting to go to college look at the same costs a boy or girl in the city do.
So when US farmers sold grain in 2012, like many years now that half the year is gone and it is three to four months from harvest, grain in storage will be sold. The July November soybean spread topped on May 23rd and instead of squeezing July soybeans, look for deliveries from elevator's owning hedges for producers and forward contracts for corn and soybeans for July.
Wheat is holding up better than I expected at this point. Winter kill in parts of Kansas and Colorado seem to be supporting KC wheat more than the negative news of non-approved genetically modified wild wheat found in shipped wheat to Japan and improvements in the KC crop condition as of May 23rd.
Corn exports have been dismal and likely will remain dismal especially with the plentiful supplies in South America. However, demand in the US for feed and distilling is keeping basis tight and likely will until the market realizes cattle on feed numbers into the summer will drop and drop hard as we start to see the lack of cattle from the liquidation from 2011 in the Plains and Southwest.
Soybeans demand is strong and traders want to concentrate at least for the time being on US old crop stocks versus the record breaking crop in Brazil. Speaking of Brazil's crop I look for future reports to show yield increases. Traders are concentrating on shipping delays and seem to forget the longer the delays take place moving all grains in South America, all countries, the more competition for vessels will occur when the US wants to move grain. Don't be surprised to see more soybean cancellations for old crop US beans and throughout the summer cancellations for new crop. It is cheaper to buy South American grain and even though it is delayed, there is plenty available.
Any change now through July in weather patterns will be fuel to rallies and rain and warm weather in July will be the damper keeping a lid on any rally. As of Monday the US corn crop was over 90 percent planted. It is wet in the Dakotas, Minnesota and Wisconsin and it is very likely farmers as you read this report will consider not planting corn or soybeans now if they own the land and take the insurance payment, but with high priced land recently purchased or rented, it is likely to see intended corn acres go to soybeans.
If you are a US farmer and have read this report, please let me know what you are deciding to do.
As always, I truly want to hear from all readers. Please include a phone number to verify I am not getting several replies from the same person over and over.
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