The uptrends in corn and soybean prices have been broken, causing many farmers to wonder if the market is satisfied with the potential for the new crop. The calendar says it is still June, and USDA says only 70% of the corn is good to excellent and 9% of the soybeans have yet to be planted. If that perspective is “good enough,” how should an uncertain crop be marketed?

We are a week away from the June 30th USDA Planted Acreage report, and University of Illinois Marketing Specialist Darrel Good says, “The June estimates this year may contain more than the usual amount of producer intentions since considerable unplanted acreage still remains in the wettest areas of the eastern Cornbelt.” In fact, Illinois is only 79% complete in soybean planting, Missouri is 75% finished, Kentucky is 74% done, and Tennessee is 69% complete. USDA says Indiana is up to 90% planted, and Ohio is apparently finished, but 5% of the beans have not yet emerged, as indicated in the June 21st weekly crop and weather report.

Since the June 2nd high, the December corn contract has lost nearly 70 cents over the past 14 trading periods. Additionally, the November soybean contract has lost more than $1 in the past seven trading periods. Good says, “With the most critical part of the growing season yet to come, the recent sharp price declines suggest the market does not have significant concerns about yields at this time.”

If thousands of planters still have seed in the boxes, and the July calendar begins next week, what is the market concerned about, and how does someone manage their price risk? University of Missouri Marketing Specialist Melvin Brees suggests the market will take some direction from the June 30 Acreage report, and there may be less corn than the 85 million acres projected in the March Planting Intentions report. He says the stronger energy market and tighter world supplies will create demand, but slower feed use and herd liquidation could soften the demand a bit. Brees does see some current sales opportunities:
1) New crop prices have been near the highs for the calendar year, and while not at the point of the 2008 prices, they represent a significant recovery from spring lows. They would even be considered historic highs, were it not for the 2008 high prices.
2) New crop prices are in the upper part of the USDA price range, which tops at $4.70 for corn and $11 for beans.
3) There may be upside potential, but recent bullish news was discounted by the market, and there is uncertainty how the market will react to the Acreage report next week.
4) There is downside risk, since prices were much lower earlier in the year and there have been significant price declines in the past few days.
5) Seasonal prices often turn lower after peaking in June or July, and that trend may have begun with the recent market weakness.
6) Fall cash bids reflect average harvest basis, indicating that basis weakness could develop when harvest begins.
7) Prices currently offer a favorable return, where crops are in good condition and not damaged or delayed in maturity.

Brees says there are also some current signals in the market that are negative. Those include the failure to reach new highs, a break in the uptrend, the carry in the corn market and the inverted bean market, plus the higher dollar and the poor general economy. As a result, Brees says there are a number of market signals that suggest making or adding to sales.

Summary:
Recent weakness in the corn and soybean markets point to a possible change of price direction for corn and soybeans, which may push many farmers to sell a portion of the new crop and protect their price risk. This is happening despite the fact the corn crop is widely variable and many soybeans have yet to be planted. But the market may be satisfied with the way the crop is progressing due to the weaker demand compared to the past two years.