Good Weather Sets Up U.S. Grains, Soybeans for Slide

U.S. crop futures are facing a steep slide over the summer thanks to expanded plantings and nearly ideal weather that have raised hopes for big production.
Analysts project corn futures on the Chicago Board of Trade could sink nearly 17% by harvest time this autumn if weather remains favorable and export demand is routine. Soybean futures could tumble 11% as farmers bring in the new crop and alleviate a tight supply situation. Wheat futures are looking at a 7% drop due to ample supplies or if poor quality eats into demand.
CBOT corn for December delivery, which represents the coming crop, on Friday sank 2.9% to an eight-month low of $3.5950 a bushel. Soybeans for November delivery, also representing the coming crop, fell 2.1% to $9. Wheat for December delivery settled down 1.5% to $4.8350.
"I don't see anything to really be bullish about in the grains right now," said Dale Durchholz, analyst at AgriVisor, an Illinois-based commodity marketing firm.
The situation this growing season is starkly different than the past two years, when overly wet conditions delayed plantings and prevented farmers from harvesting crops in a timely fashion, thereby driving up prices.
Corn, in particular, is off to a strong start after warm, dry weather in the Midwest allowed farmers to plant early. According to the U.S. Department of Agriculture, 76% of the crop was in good or excellent condition as of May 30, up from 70% a year earlier and equal to the second-highest rating for that point in time since 1991.
Weather is expected to stay favorable for production through the first half of June, with periods of rain helping to keep the soil moist. Corn is better equipped to deal with hot, dry weather during the summer because most areas have adequate water in the subsoil.
The USDA last month projected corn production at a record 13.4 billion bushels, up 260 million from last year. Soybean production is estimated at 3.3 billion bushels, down 49 million from the record crop produced in 2009.
Commodity research firm Allendale sees a downside price target of $3 to $3.20 for the December corn contract, while Summit Commodity Brokerage projects a slide to $3 to $3.25. Both firms see November soybeans heading for $8.
"If you drive around and look at the corn and the crop we've got coming here, it's unbelievable," says Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage, based in Des Moines, Iowa. "Everybody's crops are great. It's going to get pollinated early and probably miss the heat of summer."
Pollination is a key period of development for corn, and plants can suffer if the weather is too hot or dry during that time. Pollination should happen earlier than normal this summer because the crop was planted earlier than usual.
Soybean planting, which occurs later than corn planting, was slightly behind the average pace as of Sunday, although plants in the ground were developing faster than normal.
"Soybeans have really started to just pop everywhere," Mr. Durchholz said, referencing their quick development. "We're starting out with a good crop."
Wheat, which is being harvested in the southern Plains, faces downward price pressure because this year's crop will expand already-swollen inventories. Allendale sees CBOT December wheat hitting a low of $4.50 once harvest is about 50% complete and again once corn is being harvested. Corn and wheat are linked because both grains are used for animal feed.
Farmers are worried about the quality of winter wheat because the crop has been hit with fungal diseases and excessive rain in certain areas. Some plants also are struggling because they were sown later than normal last autumn because of wet conditions.
Farmers are hoping to produce a good-quality crop this year so they can blend it with poor-quality wheat left over from last year. Another poor-quality crop could weigh on futures prices if farmers are forced to sell it at a discount or for use as animal feed instead of for human consumption.