“The biggest emotion in this market has been more weather-related and rightfully so,” said Joe Victor, director of marketing, Allendale, Inc. Victor’s comments came at a press briefing at the Chicago Board of Trade on USDA’s June 28 forecast acreage report.
“Lincoln, Neb. normally receives 4 inches of rain in June,” he said. “The least amount of rain they had was in 1911 at 0.56 of an inch. Thus far this month, they’ve reported 0.17 of an inch. Not a lot of moisture.”
The lack of rainfall has also caused some problems with irrigated corn producers receiving a timely allotment of water from the region’s rivers. “Things aren’t as rosy as people may think. I’m telling you. This crop is not out of the woods yet.”
Victor is positive about continued strong demand for soybeans and corn. “I don’t think we’re going to see China subsidize as much corn as they’ve been able to and with the shortfall already in Argentina’s crop, our corn exports could persist for quite some time.
“It’s going to be a very fascinating year. And you have a weather market on top of this. We’re going to see some potentially much higher price levels during the summer.”
The soybean complex, “has the best upside potential,” said Victor. “We’re going into July with really good bean yields (projected by USDA). A lot is going to depend on the Gulf moisture.
“But assuming we’re going to struggle and not end up with a trend yield number, then we get down to some interesting new crop supply numbers. We don’t believe it’s unrealistic to take two to four bushels off trend yield.”
A weaker dollar could help corn and soybean producers, too, according to Dick Loewy, general manager and vice president of Doane’s Agricultural Services. “We did a study on the U.S. dollar versus the deutsche mark and the yen for meal, wheat and beans. It’s the first time in seven years that we have a competitive edge. It’s very important to exploit that.“
Loewy added that for soybeans, “For the first time in five years, we’re not starting off projecting a record supply. There’s no doubt that we are going to get better potential export demand.”
Loewy expects prices for soybeans to possibly creep over $6 per bushel in a weather market. But the Argentina and Brazil crops, “could hurt us during our strong export period between September and March. That’s something we need to watch for.”
According to Loewy, “If you get new crop prices on corn up to $2.50, I would start pricing at that level and continue to sell on a scale-up basis on up to $2.60.”
The outlook for wheat, once thought to be the crop to lead commodity prices out of the doldrums, is not so good, according to Loewy. “We now have nine competitors now instead of just four. The European Community, Australia, Argentina and Canada plus Pakistan, India, Turkey, Eastern Europe and the former Soviet Union.”
“The latter five are all former importers who have become exporters. That’s probably going to override the benefit we get from any weakness in the dollar.”