What is in this article?:
- Corn, soybean prices continue to retrace 2012 drought rally
- Acreage concerns reduced
• For new-crop corn, prices have completed the transition back to pre-drought levels.
• For new-crop soybeans, prices are closer to a complete transition back to pre-drought levels.
Acreage concerns reduced
“This past week of rapid corn planting progress has reduced some of the concern about acreage and yield prospects,” Good said.
“A larger-than-average percentage of the 2013 crop will be planted later than is optimum for maximum yield potential, but there is growing confidence that the 2013 crop will be large enough to meet market requirements at much lower prices than experienced over the past year. However, the season for determining average yield and production is just beginning,” he said.
Good said soybean prices have behaved similarly to corn prices but are still well above pre-drought levels. July 2013 futures peaked at $16.05 on Sept. 14, 2012, about $3.85 above the June 2012 low.
That contract is currently trading near $14.60, still in the upper half of the trading range of the past year. Due to the ongoing futures price inversion, spot-cash prices in the Corn Belt have been above July futures all year, with basis levels strengthening in recent weeks.
Old-crop prices are being supported by prospects of a minimum level of year-ending stocks and the need for consumption to remain under the pace of a year ago.
“For example, available supplies are expected to limit the domestic crush to 1.635 billion bushels, 4 percent less than the crush in the previous year,” Good said. Based on National Oilseed Processors Association (NOPA) crush estimates, crush during the first half of the year was 8 percent larger than the crush of a year earlier.
“Crush during the last half of the year then needs to be 16 percent less than that of last year,” Good said.
“Crush in March was down only 2.5 percent, and the just released crush estimate for April was down about 9 percent from the crush in April 2012. A 22 percent year-over-year decline is needed during the last four months of the marketing year,” he said.
For new-crop soybeans, prices are closer to a complete transition back to pre-drought levels, Good said. November 2013 futures peaked at $14.10 on Sept. 14, 2012, $2.70 above the June 2012 low. That contract is currently trading near $12.25, $0.85 above the low of a year ago and $1.85 below the peak.
“New-crop price weakness reflects expectations of a large U.S. harvest this fall following the recent harvest of a very large crop in South America,” Good said.
“Old-crop corn and soybean prices are expected to be supported until sufficient rationing has been confirmed. If 2013 production levels reach current expectations, further weakness in new-crop prices would be expected. Of course, that is the question. What kind of summer weather will unfold?
“For the old crop, current price premiums suggest a strategy of spacing additional sales over the next several weeks. For the new crop, production uncertainty along with prices well below the spring crop insurance prices suggests a strategy of modest sales for those with high levels of revenue insurance coverage,” Good said.
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