July 14, 2006

US weather remains key to corn, soy markets

Although the US Department of Agriculture reduced corn and soybean ending stocks in Wednesday's (Jul 12) supply and demand reports, the weather remains the key market factor, North America Risk Management analyst Jerry Gidel wrote in a research note to clients Thursday.

June's quarterly stocks report and the recent dry weather in the western corn belt, where some areas have received just 50 percent-60 percent of normal moisture since May, prompted the USDA to keep 2006/07 corn ending stocks relatively unchanged at 1.077 billion bushels, he said.

Increases in both new-crop and old-crop feed usage and a 25-million-bushel increase in old-crop exports contributed to the ending stocks estimate, as did the USDA keeping 2006/07 yield at 149 bushels per acre, said Gidel.

In soybeans, a slight increase in 2005/06 soy crush and exports--5 million bushels each--and a 15-million-bushel increase in seed/residual use helped trim 2006/07 ending stocks to 560 million bushels, he noted.

Despite the tightening, weather remains the key market factor for both corn and soybeans, Gidel says. With the majority of the US corn crop pollinating, and spring wheat filling kernels over the next two weeks, a sustained hot streak across the central US could shrink western corn-belt and Northern US Plains spring wheat yields significantly, he said.

Soybeans will follow the grains, but August remains its important pod- filling growth period, so rallies may be short-lived if funds scamper after this market on spillover enthusiasm from the grains, Gidel said.