COLUMN: Will the Bulls Dominate Again?

It has been an ugly few weeks for the grain markets. The wettest drought ever boosted December corn to a high of 449'0 and then down to a fresh contract low at 346'0. Weather forecasts change almost as fast as the markets do and what was a strong...


It has been an ugly few weeks for the grain markets. The wettest drought ever boosted December corn to a high of 449’0 and then down to a fresh contract low at 346’0. Weather forecasts change almost as fast as the markets do and what was a strong bullish market quickly turned sour. But, sweet may be the next flavor once again as the forecast is making a major change and production concerns are again no longer in the back of traders’ minds. The U.S. Department of Agriculture’s July World Agriculture Supply and Demand Estimates report was released on July 12 and came as a surprise to the market. Following the Quarterly Grain Stocks & Planted Acreage report on June 30, which came out surprisingly bearish, the July WASDE had a bullish twist. The average trade missed the Quarterly Stocks by 194 million bushels and missed July ending stocks by 124 million bushels with an end result of 2016 to ’17 ending stocks increasing by only 73 million bushels to 2.081 billion bushels. Not a bullish number by any means but it was bullish in the sense that it simple wasn’t as bad as expected as the average trade was looking for 2.205 billion bushels. With WASDE now in the past weather is once again the primary focus.

Several reputable weather forecasters are calling for a renewed spell of extreme heat impacting the majority of the US growing region starting this weekend and lasting until the end of July and potentially into August. For the Plain states from South Dakota down to Texas is expecting temperatures ranging from 100 to 113 degrees while the western Corn Belt is expecting 98 to 106 degrees and 95 to 104 degrees for much of the central Corn Belt. This is coming at a critical time as the silking is now estimated at 32 percent as of Monday’s Crop Progress report. While moisture conditions are still mostly good with topsoil rated at 63 percent adequate and 8 percent surplus, extreme temperatures will be sustainable for several days, however if the heat dome last longer and potentially into August; we then may have some major pollination issues resulting in lower yields.

A potential warning shot to remember the crop is not made until it’s in the bin was Brazil’s CONAB report. CONAB lowered their 2015 to ’16 corn crop to 69.1 million metric tons verse the previous 76.2 million metric tons and USDA followed up with a reduction to 70 million metric tons compared to their previous 77.5 million metric tons estimate. This was the result of a late season hot and dry event that ultimately cut their production by 7.5 million metric tons according to the USDA. If the U.S. follows the path of Brazil, and it appears possible, we may soon see our own yield estimates falling. Currently the USDA is using a yield of 168 bushels per acre. Cut yield down to 160 bushels per acre, less than 5 percent, yet production would fall from 14.540 billion bushels to 13.856 billion or roughly a reduction of 684 million bushels. Without any price rationing or changes in demand, ending stocks would fall to 1.397. The USDA lowered Brazil’s 2015 to ’16 crop by nearly 10% and some forecasters see this potential heat spell to be worse then what Brazil experienced.

While this is still a “what if” for the market to trade, it is also important not to get too wrapped up in weather stories. The topic of drought has come and gone before with little to no impact and it could do so again. For the time, soil moisture is still friendly to higher yields as are crop conditions with corn rated at 76 percent good to excellent verse 2012’s crop rating at this time stood at only 40 percent good to excellent. The closer we get to harvest, the less time for things to go wrong. Many producers missed out on sale opportunities earlier this year with the idea of 2012 all over again. While we may not return to previous highs, opportunities within the market remain.

Editor's note: Grossman is an ag market strategist with Zaner Ag Hedge. He can be reached at  or 312.277.0119. Follow Grossman on Twitter, @AgHedgeGrossman. Visit for more information.

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