More Feed Grain, Less Food Grain

June 30, 2008
By Gary Wulf
Dow Jones Newswires

CENTRAL CITY, Neb. (Dow Jones)--A new report issued Monday by the U.S. Department of Agriculture said U.S. grain bins hold fewer bushels of cash soybeans and wheat - but more corn, sorghum and oats - than they did one year ago.

That quarterly grain stocks report said physical supplies of wheat and soybeans are down by about a third from what they were just 12 months ago - at 306 and 676 million bushels respectively - although domestic stockpiles of corn have actually grown by 14% to top 4 billion bushels in all.

"Stocks numbers were pretty much within the range" of pre-report industry estimates, said Ag Management Services market consultant Rich Balvanz. "You have to assume that there has been some degree of (demand) rationing take place at these (record-high corn/soybean) price levels. We've seen exports slow down certainly. Livestock feeding rates have also come down, with the lighter weights of animals being slaughtered."

Aside from a 1% decline in barley supplies, inventories of other feed grains are also up substantially from a year ago, with Monday's USDA report showing increases of 30-32% for grain sorghum and oats.

The USDA also released updated figures on spring planting Monday, which showed that U.S. farmers seeded 1.3 million acres more corn, and some 300,000 acres less wheat/soybeans, than was originally suggested by the agency in March.

"(Corn) planting got off to a slow start across the Corn Belt, Ohio Valley, and the northern half of the Great Plains as frequent precipitation and cool temperatures during March and April prevented spring planting preparations," said USDA. "Despite intermittent showers and below-normal temperatures, producers were able to make rapid progress during May, particularly across the upper Midwest and northern Great Plains."

Both USDA reports are forecast to provide pressure to grain futures, which ended overnight Globex trading with cash-contract gains of 3-8 cents for wheat/corn and 11-15 cents for soybeans.

"After moving to fresh all-time (corn/soybean) highs last week as flood waters surged, today's reports could cool off the market," said Bryce Knorr of Farm Futures. "Much will depend on just how much weight traders put on USDA's acreage figure, which will be updated with another survey in July."

Cash basis trends were mixed across the U.S. interior Monday, with premiums declining by an average of 2 cents per bushel for soybeans/sorghum and 1/2-3/4 cent for corn/spring wheat; even though winter wheat basis firmed.

"Cash markets were said to be quiet ... with some delays in the hard red harvest being reported, along with some very scattered slowing in soft red areas," said a CBOT market report.

National cash price indexes maintained at the Minneapolis Grain Exchange currently stand at a record-high $15.02 for soybeans, indicating an average basis level of -79 1/2 cents relative to July CBOT soybean futures contracts. Domestic cash prices also average a record-high $7.05 1/4 for corn (-49 1/2 cents basis July CBOT corn), $8.72 3/4 for hard red winter wheat (-52 1/4 cents basis Kansas City Board of Trade July wheat), $7.03 1/4 for soft red winter wheat (-$1.92 1/4 basis CBOT July wheat) and $10.17 3/4 for hard red spring wheat (reflecting a 15 1/2 cent premium to MGEX September wheat futures).

CROP WEATHER

Rain was falling from central Texas to southern Alabama on the last day of June, while the remainder of the Great Plains, Midwest and Southeast remained dry.

"Clearly the month of June will be 'one for the record books' as far as precipitation totals are concerned for much of the Midwest. Most likely it will be listed as the wettest such month ever recorded for the Corn Belt," said Freese-Notis Weather. "Large parts of the region saw more than double their normal rainfall, but there were significant pockets of real estate in southwestern Iowa, far northern Missouri, southwestern Indiana, and southern Wisconsin where rainfall for the month exceeded three times the normal level."

Temperatures for June were cool in the Pacific Northwest and the northern Plains, while abnormally warm conditions dominated from Texas to the Carolinas.

The service said long-rage forecasts indicate that July will hold a far different weather pattern for the U.S. grain belt.

"Abnormally warm temperatures for the first half of the month will be found in the same areas that were so cool last month, namely the northern Plains and the Pacific Northwest," said Freese-Notis. "Temperatures for the eastern half of the nation will start off cooler-than-normal on average for the first week of July, then tend to be more normal after that."

Such a pattern means that conditions in the Corn Belt will not be nearly as wet as they were in June, but will not be completely rain-free either.

"For example, a strong cold arriving for around Thursday should be a significant rain-maker for especially southern parts of the region," said the service. "That frontal system may tend to hang around the Delta and Southeast for a good period of time, making those areas quite wet."

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