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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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