The summer solstice is upon us, marking the official start of summer and closing the books on spring—one where a multi-year drought that had affected a good portion of the western Corn Belt was erased.

As of this latest drought monitoring report, less than 3% of the corn production area is now in a drought, while the national soybean production area affected by drought has fallen to 2%.

Courtesy: U.S. Drought Monitor

The latest forecast is for the heat dome set up over the eastern portion of the country to retrograde back west the last week of June. This will allow for better chances of rainfall to fall in the eastern portion of the corn belt and temperatures to cool down. The longer-range maps continue to call for the heat to build back in July, which could lead to pollination issues if hot days and warm nights materialize as some have forecasted.

Weather impacting basis and spreads

The heavy rains in the northern portion of the Corn Belt have impacted the spreads and basis in the corn and soybean markets.

The Upper Mississippi River is dealing with river-level issues due to the excessive rains. This has limited barge loadings and nearly shut off all corn as of last week as loaders opted for soybeans due to limited operating conditions.  This remains the case based on spreads and the CIF market.

Additional rains are forecasted to persist for some time for this area of the country.  Historically, Lock 15 near Quad Cities averages 33% of corn loadings at this time of year, while soybean loadings for this area average 33% to 50%. 

Boat lineups in the Gulf of Mexico are light on corn vessels, and there are no sole corn boats in the lineup. ADM still shows several combo boats with corn destined for Caribbean and Latin destinations.

Despite the lack of vessels in the Gulf, the U.S. maintains a competitive position in the corn business even as Brazil's harvest continues. Brazil's values have been firmer since last week and remain above year-ago levels.

Meanwhile, Brazil remains focused on soybean execution. Ukraine is essentially out of stock, while Argentina remains backed up on loadings into July.

A weather premium is possible

For anyone with unpriced grain, both old and new, the last few weeks' price action has undoubtedly been frustrating as prices have slid back to their spring lows. With a vast portion of the growing season ahead of us, adding back some weather premium makes sense.

The latest National Weather Service July outlook is for above-normal temperatures and below-normal precipitation for most of the Corn Belt. As for the cash corn market, the basis continues to have a firm undertone to it as the farmer is still disengaged from marketing due to the recent price action. So, if you have unsold bushels, be sure you let your cash grain buyer know. Maybe you will receive a basis push.

Courtesy: NOAA/National Weather Service 

Take advantage of weather rallies

We encourage producers to use any potential weather rallies to market unsold old crops and new crop bushels or at least implement price protection. Estimates are that approximately 77% of old-crop corn has yet to be sold, while only 9% of the anticipated new crop has been sold.

With carryout above two billion bushels on the U.S. corn balance sheet, and with not anticipation of significant production losses, the odds are high that prices will be closer to the $4 level than $5 by the fall. 

Like the corn market, we view any rebound in soybean prices after the recent price as an opportunity to market unsold old crops and new crop bushels.

Expect extreme moves next week

Reports are that approximately 81% of the old soybeans are marketed, while only 7% of the new soybeans are sold. With the new crop balance sheet projecting ending stock to swell to 445 million bushels despite a 125 MB increase in demand (which currently looks unrealistic due to the lack of China purchases), fall lows likely will be closer to the $10 price level rather than the $12 that July futures are currently trading at.

USDA will release the quarterly grain stocks report and the planted acreage survey next week on June 28. The trade reaction reports have a history of producing higher and lower extreme moves, so make sure you have offers in place to take advantage of any extreme moves that might happen.

If you have questions or would like specific recommendations for your operations, don't hesitate to contact me directly at 815-665-0461 or anyone on the AgMarket.Net team at 844-4AGMRKT.

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