Crop prices are beginning the annual meteorological reaction. Adverse weather gives price increase and favorable weather takes it away. Much of the weather premium was removed from the market in last week’s price declines. Dollar exchange rates have been volatile and affect prices directly. Beef prices are rising but cattle on feed declined 12 percent in May and another 3 percent in June. Pork exports are increasing but herds of swine and cattle are near a decade low. Fewer animals on feed reduce grain use. Feed remains the number one use of grains and soy-meal. Indian monsoon rains are expected to decrease 32 percent below average. That will limit crop production there and possibly exports.
– Bullish factors: Corn acres are expected to decline to 83 million acres from 85 million. Much of the weather premium has been removed from the corn market. Market traders may not have factored stink bug infestations and dry weather potential into this market. Export inspections increased 6 percent in a week to 38 million bushels. Farmer selling remains light. Exports exceed market expectations by 14 percent at 1.14 million tons.
– Bearish factors: Favorable weather for production makes the 153 – 155 bushel / acre USDA estimate logically acceptable. Economic recession is not over. The demand for meat is low reducing feed grain use. EPA regulations could limit the profitability of ethanol and the growth of bio fuel industries.
– Bullish: Wheat acres are expected to drop 300,000. Wheat production may also be limited with later than average planting for spring wheat. Farmer selling in wheat markets is lower than markets anticipated. U.S. wheat production is not only less than average quantity but quality is also an issue. Test weights are below average.
(Test weight dockage begins at 58 and increases significantly at 56. Test weights of 50 have been reported.)
– Bearish: World wheat supplies are ample depressing demand for U. S. wheat and therefore prices. The U. S. winter wheat crop is adding to that world supply. Winter wheat production potential increased in the southern hemisphere. Australia and Argentina have favorable rain. Export inspections above 13 million bushels did not meet market expectations. Wheat fundamentals of supply and demand are bearish and so are the short term technical charts.
– Bullish factors: Thailand and Vietnam have limited exports in light of reduced U.S. production potential. Total acres of U.S. rice are lower than intended but how much lower is unknown. The U. S. rice crop is planted late and production potential decreased. Rice water weevil infestations are common creating another potential production limitation.
– Bearish factors: Exports were down 81 percent from last week near 23,000 tons. Supplies in Thailand and Vietnam remain in storage limiting price potential. World wheat supplies are also large and people will substitute wheat for rice when prices are lower. The market trend is down.
– Bullish factors: Increasing world stock prices push cotton prices higher but any fall in prices will have the opposite effect. Cotton crop condition ratings are declining as squaring is behind average belt-wide. Acres are fewer than intended. Half the nation’s cotton crop is in Texas where abandonment from dry weather is possible. Late planted cotton has lower production potential. Cotton prices are cheap enough to attract buyers. Turkey was the big buyer this week driving exports to 177,000 tons.
– Bearish factors: Trader selling took prices down but that activity has slowed to a near crawl. India is expected to increase cotton exports by 10 percent. Weather has been favorable for Texas cotton production. Stored cotton in the United States and China remains available.