Yesterday was “turnaround Tuesday,” but for the corn market it was a terrible Tuesday as selling continued. Yesterday we tapped into the thought processes of Darrel Good at Illinois and Melvin Brees at Missouri to gain their insight into the grain market as it weakens. Today we’ll find two more marketing specialists to see if they have different perspectives.

Looking at the influence of outside markets is Alan May at South Dakota State University, who says the falling price of crude oil has been a particularly strong factor on corn. But he also says the demand for commodities has slowed due to inflationary signals that have caused investors to liquidate their positions. May underscores the fact the market has been a demand market, rather than a supply market, and while that is still the case, demand projections call for fewer bushels of corn. While ethanol wants more, exports and livestock want less and the net difference is 215 million fewer bushels wanted by the market.

Even though ethanol wants more corn, Chris Hurt at Purdue, says, “We will likely look back at $7.00 corn and say that was just “too high.” He says ethanol plants slowed down at that point and exporters stopped doing business, and when that happened the carryover began to grow and prices began to fade. Hurt says about that time the corn crop ratings began to improve and he expects the August Crop Report to show corn averaging over 150 bushels per acre, which would push harvest prices into the $5 to $5.50 range.

May’s warning is that no one should be surprised at the downturn in the market, but the skid will not last, and in the meantime your marketing plan should be adjusted. He says the new crop production will play a major role in how the demand market views the sufficiency of supplies. Hurt agrees, but adds that corn values are linked to the energy output of ethanol and ethanol is linked to the value of crude oil, which means corn will have that level of support, except during the harvest glut. Hurt says corn prices have averaged 4.5% to 5% of the value of crude oil and 4.5% of $120 oil ($127 Tuesday) is $5.40 for corn. And Hurt adds, “New crop basis will likely be better than current bids, so this continues to favor producers selling futures through their commodity advisor rather than forward contracting at the elevator.”

In the soybean market, Alan May says there is less logic for the price decline compared to corn because soybean supplies are tight for the old crop and new crop as well. But he says demand has softened because of high prices and competing supplies from South America may be available. He also says the weaker crude oil prices have helped push down commodity values across the board.

Purdue’s Chris Hurt says the tight inventory will support the bean market, but the reductions in livestock production will slow the crush.

May says the downward skid in soybeans will not last, but should not have come as any surprise, and marketing plans should accommodate the changes until total production is determined and if the market decides if it can meet the demand. That is a major consideration to Hurt because of the uncertainty of acreage, the large double crop acreage, the large amount of replanted beans, and whether they will really mature. He says yields tend to be determined by weather in August and early September.

Hurt’s yield forecast puts production at 3 billion bushels, which does not build stocks, and he points out that current harvest delivery bids are well above USDA price range forecasts. That means the market wants bean commitments now, instead of later, and the harvest basis is about $1. He warns not to hold beans long because of the price drop going into harvest and a good sales opportunity for the old crop.

Summary:
Soybean prices have faded somewhat because of weakened commodity values and price rationing has softened the demand. But supplies are tight for both the old and new crops, and while new crop prices are above USDA estimates, the harvest basis is not pretty. Demand is expected to stay strong, but the supply remains uncertain because of the flooded acreage impact and late planting that could impact maturity. The market is seeking beans, but there is a strong price break as the new crop will be delivered. Soybean values are expected to remain relatively high throughout the year because stocks will not be built.