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Grain Supply Update: July 24, 1996
Grain Update, July 24: Reality VS Wishful Thinking
© Geri Guidetti, 1996
Once again, the grain markets appear to be trading on emotion and
wishful thinking instead of reality.
Or, maybe it’s the focus on the little picture instead of the big one.
Beginning on July 15th, the day after my last report, corn and soybean
futures prices began plunging precipitously (confidence in a big
harvest), reaching lows unseen since April. On July 19th, The Wall
Street Journal’s Commodities report explained the thinking behind the
"good news".
Noting that three weeks without rain drove corn and soybean prices to
all-time highs and traders to worrying that crop yields would drop,
Fred Vogelstein, the Commodities reporter wrote, "But that anxiety has
been literally washed away this week, as worries about continued dry
weather last week gave way to showers over the weekend and downpours in
much of the Midwest Wednesday." One broker, Steve Bruce, said some
areas of the eastern corn belt had received 15 inches of rain in 24
hours (17 inches in Aurora, IL) and added that, with a few more
rainstorms of average size "we’ll have a pretty good corn crop",
according to the Journal. A grain analyst, Joel Karlin, said, "If I
were a corn planter, I couldn’t ask for better weather." The rosy
outlook and lower prices brought corn prices back down below those of
wheat. This, the report notes, is evidence that "the market is starting
to return to normal." Again, that was July 19th.
Yesterday, July 23rd, Vogelstein notes that the plunge "made some wonder
if the grain rally of 1996 is finally coming to an end." Steve Bruce is
quoted as saying, "This is a perfect growing weather for corn and
beans." (Glad he’s not betting my money!) The article goes on to say
that the huge domestic and foreign demand for U.S. corn threatened to
deplete low grain reserves, but that demand has fallen because of the
higher prices and the "perfect" corn and soybean growing weather. Then
it even gets rosier: "…there is an increasing sense that the days of
skyrocketing prices are over." Dan Basse, executive VP at Chicago’s
AgResource Inc., adds, "The [booming] grain market of 1996 is
yesterday’s news." Uh, huh.
Ah, but what a difference a day makes. The six day corn and soybean
price plunge reversed suddenly yesterday with the USDA’s report that
corn crop condition had shown little improvement over last week, and
that soybean crop condition had eroded. The cold, wet Spring planting
conditions followed by the dry, hot weather of July—conditions and
potential impacts we have discussed in earlier updates—had taken their
toll. Only 61% of the U.S. corn crop is in good to excellent condition,
and soybeans in poor or very poor condition are now at 13%, up from last
week’s 11%. The "perfect" weather cited by analysts and brokers this
week could never reverse the damage and delay caused by earlier weather
extremes. You have to grow ‘em to know ‘em, in my opinion. ( I know
>from my email that many of you are doing just that. You are well ahead
of the pack on the learning and preparation curve—perhaps the top 1%.
Congratulations! )
Wheat
Wheat prices rose moderately on the 22nd ,with the focus shifting from
weather concerns to global demand factors. Remember my mention, a few
weeks ago, of a rumor that Egypt might still be in the grain market?
Well, it has ordered 500,000 tons of wheat, and Pakistan has ordered
270,000 tons. A Dean Witter, Reynolds broker reports that Sri Lanka and
Algeria may send big orders later this week.
This was followed by sinking prices for September wheat ($4.5375/bu.) as
a result of China’s cancellation of a purchase of 725,687 tons of hard
red winter wheat. Go figure the optimism. Best guess is that it is
strictly a knee-jerk, emotional response. Remember that we are feeding
wheat instead of corn down-on-the-ranch in the drought-stricken
Southwest, and wheat stockpiles are being rapidly depleted. Glad to hear
so many of you have bought or are growing wheat this summer. The
information, below, will make you even happier.
>From a kind resident/observer in Michigan, comes more worrisome news.
The front page of the July 23, Morning Sun in Alma, Michigan, carries a
story by Managing Editor, John C. Ashe, entitled, "Now Comes Another
Problem for Farmers: Wheat Toxins." Dan Rossman, the Gratiot County
extension agent is quoted , "The wheat harvest may not be normal this
year. We have the potential for a big problem."
It seems that the cool, wet conditions during planting time this Spring
allowed a fungus to develop in some wheat fields. These fields are due
to be harvested later this week, according to the article. Apparently,
farmers are being advised to modify their harvesting procedures to
eliminate toxin-contaminated wheat kernels. Grain elevator operators
are already formulating policies and procedures to minimize the toxin
problem. Rossman says the toxins appear to be more prevalent in Ohio
and Indiana, where more wheat has already been harvested. "It’s enough
to cause widespread concern among the growers and millers," he said,
according to the Morning Sun. I will update you on which fungus and
toxin, identification on infested kernels and potential health effects
as soon as I get the information.
The same article reports that corn crops are being affected by corn
borers, with the potential result of a reduced yield of 15% or more.
(They are bad, here, in Maryland, too, and the corn is otherwise looking
great in this small state.) The maturation of late-planted soybeans and
other dry beans in the corn belt now depends on the whims of nature—they
are needing to have a late fall. Army worms in both wheat and corn have
also added to their woes. "This is not normal," the paper reports
Rossman said. "This is very unusual to have such major problems one
right after another."
These are unusual times….Geri Guidetti, The Ark Institute
***************************************************************
Build Your Ark! How to Prepare for Self-Reliance in Uncertain Times:
Book I: Food Self-Sufficiency http://www.lis.ab.ca/walton/geri.html
Grain Supply Updates: http://www.lis.ab.ca/walton/geri1.html
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