Unseasonably cool weather is a concern for all crops. Development is retarded and late crops usually yield less. China has eminent production potential reductions related to weather. Heat unit accumulation could affect corn, cotton and soybean yields as harvest moves north.
Most grain markets are in a consolidation pattern with all the news factored into current prices. Trading is light and volatile.
The Commodity Futures Trading Commission set position limits for all speculative traders.
Tightening supplies are expected in soybeans, meal and oil by September. Private estimates of soybean production are near 3 billion bushels but that is below USDA predictions and bullish in light of current demand. Canadian canola production is estimated to be 24.5 percent less than average. Less canola oil and less palm oil will be available next year. Soy oil is the best substitute available. Soy oil supplies could become very tight forcing soybean prices to rise. Chinese soybean buying is slowing down. China has a month’s supply of soybeans sitting in ships at harbor. One cargo of 64,000 tons was shipped to China this week.
Soybean export inspections were 7.58 million bushels. That is up almost a million from 6.6 million bushels inspected last week. World ending supply estimates have dropped 1.5 million tons lower. China sold 9,600 tons of 500,000 tons offered at auction. The price of Chinese beans exceeds world market price. Brazil is down to the bottom of the bean barrel with few beans left to export until the next harvest. The Argentine farmer’s strike over government export taxes is heating up again. Argentine farmers have stopped selling soybeans for at least a week. Weekly soybean exports over 2 million tons were well above market anticipations. Soybean crush of 129.37 million bushels was more than 2 million bushels above market estimates.
Despite the increasing carryover supply estimates, corn acres must increase next season. Current use rates include substantially less feed demand. Livestock prices are low and world demand is off but economic improvement will cause an increase of meat consumption. Any increase in corn demand will cause ample supplies to dissipate quickly. Corn crop conditions are excellent and bearish for prices. However, only 18 percent of corn has reached dent stage. The average amount of corn at dent is 43 percent by the last week of August. Cool weather could reduce corn yields, especially in the north.
Traders expect a bumper corn crop despite unseasonably cool weather. Weather is driving corn prices. Lower prices encourage demand. Taiwan is buying corn from the United States. China has a drought affecting corn yields adversely. Export sales of corn were 973,000 tons. That number is within market expectations. South Korea bought another 105,000 tons after the export sales report.
Higher corn prices are supporting wheat price increases. India plans to plant more winter wheat to offset lower rice production. Spring Wheat harvest is 22 percent complete in the United States but the average harvest is 64 percent complete by this time. Export inspections were 16.67 million bushels. Last week export inspections were 14.3 million bushels. The increase is 14 percent but total wheat exports still lag behind USDA projections. The positive trend is short term. However, the Canadian crop is vulnerable to early freeze, Russian production potential is down, Australian dry weather is reducing yield potential, and South American plantings are 25 percent lower than average. Germany estimated a major decline in wheat production.
Egypt bought 120,000 tons of U.S. wheat. Nigeria, Egypt and Japan were the large buyers this week. Weekly export sales were the largest of this market year at 642,700 tons. Wheat supplies in Europe and Asia are large due to a bumper crop last year but those supplies will become tight within the year.
Crop production estimates for rice are difficult to estimate. Gulf coast rice harvest has started and the crop is good. Much of the Gulf Coast crop was planted on time. Much of the rice belt has delayed planting and therefore lower yield potential. The crop is erratic in that many fields of good rice have later planted lower yielding fields across the road. Rice growers are beginning to feel that harvest / storage pinch where rice in the bin must be moved to make way for rice harvest. Grower selling will induce harvest price pressure.
World production is down and prices have upward potential. Large wheat supplies pressure prices as importing countries will substitute wheat for rice. Thailand rice prices are $160 above Vietnamese rice prices. Lower U.S. long grain production remains offset by large supplies in Thailand. Pakistan reported a 20 percent reduction in rice yields. Rice exports were strong with 143,000 tons exceeding market expectations. Range bound trading reflects offsetting factors of lower United States production and ample stores in Thailand and Vietnam.
Cotton technical charts are not showing any signs of bottom for prices. Slow export sales continue to trigger trader selling. Cotton production in the United States is now anticipated to be near normal. Texas weather remains production favorable and half the nation’s cotton crop is growing there. Cotton prices remain vulnerable to any sign of economic weakness. A drop in stock market prices in Asia, Europe or the United States causes concern over demand.
China continues to use cotton stored in reserves instead of buying from the United States. China’s cotton crop is not good and eventually supplies will tighten. China is not buying U. S. cotton. Export sales were anemic, below 240,000 bales. Use has dropped a million bales which is 23 percent below last year. Everyone expects cotton prices to rise as future demand exceeds supply. The question is when, 2009 or 2010? The cotton market trend is down.