The Enid News and Eagle, Enid, OK

June 22, 2013

Grain complex to be driven by corn news

By Rodney Jones

— Wheat harvest is under way in north ventral Oklahoma. Rain delays add to the already late harvest, but are beneficial for the summer crops.

Yield reports are mixed; however, given what the crop has been through over the growing season most producers I have visited with are pleased. Final Oklahoma production likely will come in somewhat above the wheat tour estimate of 85 million bushels, but I still think it will fall well short of the USDA estimate of 114 million bushels.

A smaller Southern Plains wheat crop has been factored into the overall grain market for some time now, and so far harvest is not generating any surprises that will be big market movers.

As has been the case for some time, the overall grain market complex will continue to be driven by corn production news. Early U.S. corn planted acres were estimated to be more than 97 million. Due to planting delays and other issues, it now appears that final corn planted acres will be closer to 94 million. With favorable growing conditions, corn ending stocks will grow. The next market influencing news likely will be summer weather in the corn belt.

Locally, the smaller wheat crop, especially south and west of us, is resulting in continued strong basis for wheat even as we get into harvest. Bids at the terminals in Enid are above the nearby futures price quote, and bids at surrounding country elevators are only a few cents under the nearby futures price quote.

Depending on the time frame one wants to look at, these bids represent a basis that is at least 15 to 20 cents stronger than the historical average. When you combine the strong local basis with predictions the world is likely to produce a large wheat crop, and the U.S. is likely to produce a large feedgrain crop, one can make a pretty strong case for being fairly aggressive with cash marketing of the 2013 wheat crop in the short run, especially on any market rallies.

Of course, there always is a chance the world wheat crop may not turn out as good as early projections, and we could see a summer weather scare in the corn belt, either of which could result in higher wheat prices later on.

Right now, I see more downside risk than upside potential, so I plan to be a little more aggressive with early marketing year cash sales. Those same thoughts apply to the summer crops as well.

Right now I see considerable downside price risk for the summer crops, so I will be somewhat aggressive in early marketing of the summer crops as soon as production potential is more certain.

This likely will be the last monthly news article I will draft for the Enid area, as I have accepted a position in the Agricultural Economics Department on campus in Stillwater, and will be commuting from our farm at Waukomis to Stillwater. I greatly appreciate the opportunity to have served northwest Oklahoma as your local economist, and I especially appreciate the friendships I have made over the past several years in the local agricultural industry.

I will continue to post periodic updated farm management and marketing information to the OSUFarmManagement Facebook page as newsworthy items come along.

Jones is Oklahoma Cooperative Extension Service area agricultural economics specialist.