USDA Projects Massive Corn and Soybean Production

  The USDA sent a shock wave into what was an already reeling grain market with their USDA quarterly stocks report. Some Points * USDA projects 94.15 million acres of corn planted.  The 3rd highest planted average since 1944.  It’s also 7% higher than a year ago. * Why?  The continued development of areas where there has been little corn in the past.  New Corn Hybrids that need less moisture are opening up areas such as the states of Oregon and Idaho.  Also ag industry has high levels of equity, technology, invested.  Planting grain is an easy play compared to many other economic activities.  Leads to lots of corn being planted. * Corn in inventory June 1 was 4.722 billion bushels up 6% from last year. * The DTN U.S national corn index closed at $3.26 bushel last week.  Near the lowest price in the last 1.5 years. * Sept Corn closed on the Chicago Board of Trade on Friday at $3.60 a bushel.  September was $4.42 a bushel on June 17th.  A drop of 82¢ a bushel in 14 days.  For hog producers a decline of 88.00 a head farrow to finish in swine rations. * We remember being at an event honoring an Ag Businessman twenty years ago.  In his acceptance speech he said “Only fools bet on droughts.” * We expect the fancy money we wrote about 2 weeks ago that had poured outside speculative capital into the corn market is running for cover.  Picture “Chickens with head cut off.” Soybeans * USDA estimates 83.7 million acres of soybeans, a record. * New areas that have never planted many soybeans.  I.e. North Dakota, New York, Kansas are adding acres to traditional soybean areas. * Inventory of 870 million bushels on June 1 is up 35% from a year ago. * Soybeans priced remain strong gaining 60¢ a bushel last week mostly due to the expectation of Brazil’s crop being short. Wheat * Continues to struggle with U.S cash prices hitting a 9 year low for SRW $4.12 bushel and HRW wheat $3.32 a bushel. * The Wheat price is so low it will keep pressure on corn prices. * Global production of wheat appears to have little weather issues this year Other Observations * U.S Hog supply running similar to a year ago. The good news 53-54% USDA lean hogs $83.23 last week, same time a year ago $75.91.  About $7 higher or approximately $15 a market hog better.  We believe the support from pork exports to China are supporting the price. * The U.S dollar index that measure dollars to a bundle of other currencies was 95.64 last week, not much different than a year ago.  This tells us that when hog supply the same, and dollar index the same year over year.  We are seeing real demand increase & when we are getting $15 more per head in today’s cash market.  We thank China and their $385 U.S market hogs * Next week Genesus will be hosting a reception Sunday Night at the National Pork Industry Conference (NPIC) at the Kalahari Resort.  On Monday Afternoon I will be speaking on Global Swine Markets while Katie Sinclair of Genesus will be presenting on Embracing Pork Quality “putting the taste back into pork”.  We hope to see you at the conference. Summary Record U.S Corn Crop coming?  Cash Corn cheapest in 1.5 years.  U.S Hog prices $15 per head higher than a year ago with profits of about $30-40 per head.  We have seen much worse scenarios.

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