News & Commentary
July 12, 2014
The question for all the grains as of lately; how low can prices go? With continuing ideal weather for corn and beans, demand not picking up yet it would seem we’re not at a bottom yet.
USDA released the supply and demand projections that were less than friendly if you’re a seller. Increased old crop corn carryout, reduced feed demand, and ideal growing conditions have December corn futures pushing downward.
The path of least resistance is still lower. USDA increasing carryout by 100 million bushels prices will continue to erode until end user buying ramps up or a threat of some type emerges. I doubt we’re at the bottom yet but time will tell.
Wheat is an interesting proposition. USDA increased US and World carryout projections from the June report because of a combination of higher production and lower usage estimates. The carryout to use for all wheat’s increased from 24.3% to 31.7% in the US. As we know in economics, if we have more of something and demand is flat, generally prices decline.
However; HRW wheat stocks as a subclass is looking snug. Ending stocks for HRW dropping below 200 million for the first time since 2007/08 crop year. That was the year prices soared to double digit prices by spring after continuing crop issues around the globe. This year’s story will likely be quite a bit different because over all wheat stocks position is better but at least it’s an interesting thought.
What I guess I’m saying is that HRW wheat has the least negative price outlook of the crops we grow. So even though I’m friendly to wheat, a little bit, understand that prices can still drop. Wheat might rally after harvest but it doesn’t have to. So when we’re filtering all the noise, remember on the world scale there is plenty of wheat to go around for now. The question is how much will our domestic users have to bid to get at the milling quality wheat that we grow?
Till Next Time