Corn and soybean prices continue to weaken, but could settle into a more "sideways" pattern as production prospects unfold, according to University of Illinois Marketing Specialist Darrel Good.
"Still, large daily price movements can be expected," says Good.
December 2008 corn futures increased about $2 per bushel during the month of June, topping out just under $8. During the same period, November 2008 soybean futures rallied more than $3, topping out just under $16.37.
"Much of the June rally was related to weather conditions in the United States as excessive rainfall threatened acreage and yield in a wide area over the Midwest," he notes. "That weather pattern followed a generally wet, cool May that resulted in late planting and slow emergence in some areas."
He adds that soybean prices were also supported by a generally strong export pace. USDA export estimates indicate that soybean exports during June totaled about 57 million bushels, compared to about 45 million in June 2007. Continued strong demand by China and interruptions in exports from Argentina contributed to the large June exports.
"Prices of both crops turned lower in July," Good notes. "Corn prices have been pressured by a combination of larger-than-expected acreage estimates released by the USDA on June 30, improving crop conditions, and lower crude oil prices."
As of July 13, the USDA estimated that 64% of the corn crop was in good or excellent condition, equal to the rating of a year ago. Lower crude oil prices have resulted in lower prices for ethanol. The average price of ethanol at Iowa plants declined from $2.82 per gallon on July 3 to $2.57 per gallon on July 18. At the close of overnight trade on July 21, December 2008 corn futures settled $1.74 below the contract high.
Soybean prices have not declined as sharply as corn prices.
"While December 2008 futures are down by more than 20% from the contract high, November 2008 soybean futures at $14.40 are down 12% from the contract high," Good says. "Soybean prices have been a little more resilient because of the uncertainty about Argentine exports and because of more concern about U.S. crop conditions."
For corn, the drop in ethanol prices over the past two weeks has been more than offset by the decline in corn prices, he notes.
"Spot cash prices for corn, ethanol, and distillers grain suggest that the current gross crush margin is at the high end of the margins experienced over the past 11 months," he says. "Corn consumption for ethanol should continue to increase as forecast as corn prices follow crude oil prices."
As of July 13, only 13% of the corn crop was in the silk stage, compared to 50% on the same late last year and the five-year average of 36 percent.
"Recent weather conditions, however, suggest that maturity will progress rapidly," Good indicates. "In addition, the Climate Prediction Center outlook for August weather contained a generally favorable outlook for the Midwest."
According to Good, as of July 13, 26% of the soybean crop was reported to be in the bloom stage, compared to 54% on the same date last year and the five-year average of 45%.
"While yield uncertainty will persist, there is more than the typical amount of uncertainty about corn and soybean acreage," Good concludes. "The USDA will provide updated forecasts of planted and harvested acreage, along with the first yield forecast of the season, on Aug. 12."