Grain market perspective

By PEARSON BURKE

Grain markets moved lower for the week. The Crop Progress Report on Monday, June 10th showed corn plantings at 95% complete nationwide with corn conditions similar to last year at this time. Spring wheat plantings were 87% complete with North Dakota at 77% finished. Winter wheat conditions continue to trail last year's ratings, particularly the Hard Red Winter Wheat crop in the Southern Plains. Kansas, Oklahoma, Texas and Colorado all have more than 25% of their wheat crop rated very poor. Winter wheat harvest is just getting started nationwide with only 5% done so far, mostly in Texas and California.

In the PNW, Washington's winter wheat crop is rated 55% good to excellent. Idaho's crop is rated 81% good to excellent but Oregon's crop is only 36% good to excellent with 31% rated poor to very poor.

On Wednesday the USDA released its June Crop Production Report. It was also viewed as bearish. Corn carryovers for the 2013/2014 crop year were only lowered from 2.0 billion bushels in the May report to 1.95 billion bushels despite the flooding and the planting delays experienced in the Midwest. It should be noted that historically the USDA makes few changes in the June report from the May report. Traders will be looking for significant changes in the July report. U.S. wheat production was also increased slightly despite the crop conditions in the Southern Plains and the spring wheat planting delays. Wheat ending stocks are expected to be lower next year at 659 million vs 746 million for this year, but corn carryover are projected to be at least twice as large for next year vs this year, at 1.949 billion vs 769 million.

While the wheat fundamentals in the U.S. look supportive they are outweighed by the big corn harvest expected and increase in world completion. Wednesday's report also showed higher world carryovers for wheat, corn and soybeans for next year and more exports out of the Black Sea. In addition Australia's wheat crop is now estimated at over 25 million metric tons vs 22 million tons for last year.

Add to this the issue of GMO wheat found in Oregon, which is slowly and I want to emphasize slowly getting resolved, and the news has been mostly bearish. Now some good news, I have led with news about corn because this year more than any other I can remember the direction of corn will dictate the direction of wheat. Currently corn is valued at $40/tn more than white wheat. The July Crop Report should show the effects of the flooding in the cornbelt and lower HRW wheat production. Also July is the weather month for the corn crop and with the later planted crop the table is set for a rally in Chicago. Also winter wheat harvest will be past the halfway point nationwide sometime in July which typically leads to a rally in Chicago. Hopefully white wheat can ride the coattails and we can see some pricing opportunities at harvest which would be unusual, but with the influence that corn is having on the this market I would not be surprised.

Pearson Burke watches the commodities markets for the Odessa Union Warehouse.