June brought an abundant wave of relentless storms, almost double the normal monthly rainfall, and a strong rally in grain prices. The wet conditions have spurred a long list of concerns for U.S. farmers and U.S. crop conditions substantially deteriorated in the final two weeks of June, according to the USDA.
Nitrogen leaching and the lack of days available to spray post emergence crop protection chemicals are two of the major concerns affecting crop conditions. Weed, pest, and disease pressure may all increase as the growing season progresses due to the deadly combination of wet and cold weather after planting, followed by delayed spraying.
Crop conditions suffered through June as unrelenting rain continued to hinder growth. "43% of the corn crop saw twice its normal rainfall in June, and 92% reported above average rainfall over the last week," reported Farm Futures. The consistent wet weather caused corn, soybean, and wheat conditions to decline during the last two weeks in June.
As of June 28th, the USDA Crop Progress Report estimated crop conditions for corn at 68% as "Excellent" or "Good," a 3% decrease from the week prior and a 12% decrease from last year. 24% of the crop was reported as "Fair," a 1% increase from the week prior, but a 4% increase from last year. 8% was rated as "Poor" or "Very Poor", a 2% increase from the week prior.
Soybean conditions were reported at 63% "Excellent" or "Good," a 2% decrease week over week and a 9% decrease from last year. 28% of the crop was rated as "Fair," a 1% increase from one week prior, while 9% of the crop was rated as "Poor" or "Very Poor".
Wheat conditions were reported at 41% "Excellent" or "Good", unchanged from one week prior, but an 11% increase from last year. 36% was rated "Fair", a 1% decrease from one week prior. 23% was rated "Poor" or "Very Poor," a 1% increase from one week prior, but a 21% decrease from last year.
July corn prices increased 18.3% in June and closed at $4.14 per bushel. Early in the month, corn prices increased as wet weather hindered farmers from completing planting corn acres. Prices declined mid-month following the release of the USDA World Agricultural Supply and Demand Estimates (WASDE), due to an increase in ending U.S. stocks on a reduction in corn use of ethanol. Corn rallied in the second half of the month as poor weather hampered the corn crop's development. The USDA Stocks and Acreage report released June 30th, led corn prices higher as stocks and acres planted came in below analyst expectations.
U.S. corn production for 2015/16 was estimated at 13.63 billion bushels in the June USDA WASDE Report, unchanged from last month, but 4% below last year's record levels. U.S. corn ending stocks for 2015/16 were estimated at 1.771 billion bushels, a 25 million bushel increase due to a reduction in corn use for ethanol. World corn production for 2015/16 was projected at 989.3 million tons, a 0.5 million ton decrease due to lower production from the E.U., Nepal, Zambia, and Zimbabwe offsetting increases reported from Russia.
The July soybean contract price increased 13.4% throughout June to close at $10.56 per bushel. Soybean prices slightly increased in early June behind strong export and sales reports. Prices traded sideways through the middle of the month as bearish USDA Crop Progress data was offset by poor weather forecasts. Prices increased in the second half of the month as Tropical Storm Bill caused significant rain in areas, further delaying planting in areas of Iowa, Kansas, Missouri, and Nebraska.
Rain across the Midwest continued through the end of June forcing prices higher on decreasing conditions reports. The USDA Stocks and Acreage Report caused soybean prices to increase behind stocks reports estimated well below analyst expectations.
The USDA estimated domestic soybean production for 2015/16 at 3.850 billion bushels, unchanged from last month in the June WASDE Report. Ending stocks for 2015/16 were estimated at 475 million bushels, a decrease of 25 million bushels from May due to increased crush and export estimates. 531.9 million tons for 2015/16, a slight increase from last month. The 0.7 million bushel increase was due to greater planting progress reported from the EU and Russia.
July wheat prices increased 28.5% throughout June to close at $6.14 per bushel. Early in the month wheat prices slightly increased on reports of poor growing conditions in Canada and Russia. Wheat prices sagged mid-month due to the WASDE Report which increased expectations for domestic and global production in 2015/16. The wet weather in the second half of June led to an increase in wheat prices as the Wheat Belt was pummeled by Tropical Storm Bill.
Estimated U.S. wheat production for 2015/16 was increased by 34 million bushels due to wet weather which improved soil conditions in the Central Plains in the June WASDE Report. The large increase in wheat production lead to ending stocks for 2015/16 increasing by 21 million bushels to 814 million, the highest level since 2010/11. Global wheat production for 2015/16 was increased by 2.6 million tons to 721.6 million tons, the second highest level on record, due to adequate rain and proper growing conditions reported out of Russia, Ukraine, and the EU.
The Rural Mainstreet Index released by Creighton University, reported farmland prices slightly lower in June. "This is the 19th straight month the index has moved below growth neutral. But, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices," said Professor Ernie Goss.
The planting season is normally a slow period for farmland sales, and this year has been no different. There has been variability in farmland sale prices over the past month, but the continued, "shrinking" of farmland prices expressed by the index has not been seen. Farmland prices remain to be quite stable over the past year. In conversations with farmers and realtors in the Corn Belt, both state that the market has been very stable for the past three to four months.
As we enter July, farmers and traders will keep a keen eye on weather forecasts as the next four to six weeks are vital for corn and soybean development. Corn pollination, which occurs in mid-July, is the most critical growth stage. Crop damage caused by June weather can often be made up in July, but poor pollination cannot be reversed. The bullish USDA Crop Stocks and Acreage Report released on June 30 added a boost to the grain rally which was spurred by recent weather events across the U.S. The December corn contract closed at $4.31, which is a six-month high.
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