Limit Up

By Tori Uhland

July 12, 2023

I’ve mentioned a few times how there are some key dates to be aware of throughout the marketing year that can have big impacts on the market, but I haven’t done a very good job of explaining what these reports tell us. The USDA releases the Crop Progress report on the first business day of each week from April 1 to November 30. That usually means Monday, and it comes out in the afternoon, so the Monday night market opening can get a little crazy, especially during critical growing periods and unusual weather patterns. If you’ve never looked at one of the reports, each progress table lists the current week, previous year, and five-year average for selected states and the overall U.S. The condition tables list the percent rated very poor, poor, good and excellent for selected states and the U.S.

Every month, the USDA releases a Crop Production report and a World Agricultural Supply and Demand Estimates (WASDE) report. The Crop Production report includes data for the U.S. including acreage, area harvested, and yield. The WASDE report is the more important one to keep an eye on. It has a lot of information, including a full balance sheet for U.S. and world wheat, rice, coarse grains (corn, barley, sorghum, oats), oilseeds (soybeans, rapeseed, palm), and cotton. It also includes data for sugar, meat, poultry, eggs, and milk. The WASDE also provides annual forecasts for the supply and use of the aforementioned products. Separate estimates are made for components of supply (beginning stocks, imports, production) and demand (domestic use, exports, ending stocks).

Supply and demand are what the market revolves around and what determines prices. It’s a simple concept but it makes a huge impact, and there are so many variables that go into it. There’s a lot to consider on both sides. Planted acres, harvested acres, the weather, exports, trade agreements, feed usage, ethanol production, the economy, government policies, and geopolitical situations just to name a few. When it rains in the Midwest, the corn and soybean markets usually have a bearish reaction. “Rain makes grain,” as they say, so more rain theoretically means a bigger supply, and without more demand, that means lower prices. That is a fickle thing, though – there are a lot of layers to all of it.

The markets have taken us on quite a rollercoaster ride lately. New crop corn went from below $5 and the lowest levels since October 2021, back up to prices around $6.30 and levels not seen since October 2022, and back down to sub-$5, all in less than two months. I’m far from an expert, but I’d say that’s the epitome of volatility. Kansas City wheat has been on a similar path, with swings also over $1 in the last couple of months. Soybeans have moved over $2/bushel in the same time period.

There are a few reasons for the volatility and things to watch for going forward. Like I mentioned last week, the June 30 USDA reports contained some surprises in the Planted Acres for both soybeans and corn, with a lot more corn acres and a lot less soy acres. We also have questionable crop conditions in the big soy and corn production areas, however, recent rains may have been crop-saving, and losses may not have been as significant as expected. There is still a lot of corn in the corn belt in good condition, but I feel pretty comfortable saying that we won’t see a record U.S. corn yield. The drought monitor looks better and the cool temperatures and wetter weather have made the crops happy. Pollination is beginning in most areas and corn is starting to tassel. Corn demand is still on the poor side and there aren’t many signs of it improving.

Soybeans are also in a weather market, but recent rains could produce a lot of improvement in crop conditions. The soybean crop is going into critical pollination in high production areas. Exports were stronger than expected last week, which is some positive news.

Wheat harvest is progressing and there have been a lot of reports of good yields and good quality, which is bearish for the wheat markets. On the other hand, the Black Sea export deal is set to expire July 17. As of June 10, negotiations to extend the deal have not been successful as Russia sees “no grounds to extend the deal.” We have been down this road before, but it is a situation to watch. Wheat demand is still poor.

The July WASDE report comes out on July 12. You’ll be reading this after the release, but the same factors still apply. The USDA numbers could shake things up a bit, but the market will continue to watch the weather, crop conditions and the situation in the Black Sea.

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