The corn market had a job to do this late week. On June 30th, the USDA estimated that U.S. farmers planted 87.872 million acres of corn, down from their March 31 estimate of 88.798. This compares to the 86.5 million acres of corn that was planted in 2009. The average estimate of traders going into the report was 89.302 million acres. As the market does; it efficiently factored in $.40 into the December futures contact.
The report on soybeans was a bit mixed, in that the USDA raised planted acres to 78.868 million acres. This compares to their March 31 estimate of 78.098 million acres and the average trade estimate of 78.292. Soybean stocks were friendly, which counter balanced the planted acres number. The USDA estimates that 571,000 bushels of soybeans are in storage, compared to the average trade estimate of 592,000 bushels. The market saw this as neutral to price and remained in the current range.
Given the timing of this rally in the corn market, just ahead of the 4th of July weekend; we may have been given a gift. There is a strong seasonal pattern for grain prices to break following this holiday. Time will tell if there is additional demand to drive the corn market beyond a short covering rally. The soybean market has held up, due to strong demand from the domestic and export markets. There still remains some time for weather to effect soybean yields, while every day without stress on the corn crop, is one day closer to a bumper crop.
As I visit with grain producers in the area, I am struck by the differences in the amounts of grain that has been priced. Some are still holding on to old crop that is un-priced. This is grain that was grown with high input costs. Others have corn to deliver on July contacts that was price last year and will enjoy much better prices upon delivery. What really concerns me is that the amount of new crop grain that is un-priced is even greater.
As I look at the demographic and economic data of the United States, I am struck by the shrinking of the middle class. The upper class or wealthiest sectors are continuing to acquire a larger percentage of the national treasure. The ranks of the working poor are growing, causing an ever growing polarization of our society. In other words, the “rich are getting richer and the poor are getting poorer.”
My fear is that we may be seeing a similar phenomenon taking place in production agriculture. Some have experience the last few years as extremely profitable, while others have struggled. We have become very proficient at producing some of the best crops in the world. Financial management and marketing seems to be a common separator between the two groups. With the current volatility, there has never been a more vital time to become a student of our business.