Trade reports indicate that feed wheat values in the Black Sea region are currently priced below US corn prices and in the short term this is seen as negative for US corn exports. The pullback may be short lived, however, given the many challenges facing US corn and soybean production this year.

Below are some of the issues:

• Some major corn production areas remain behind in plantings and some acres may not be planted at all. The latest crop progress report showed just 19 per cent of the corn crop in Ohio had been planted as of 29 May. The plantings report in March indicated Ohio farmers would plant 3.7 million acres of corn, or 4 per cent of the national acreage. Farmers there have only a few days before making some critical decisions as to whether to abandon plantings and opt for preventive planting insurance. Regardless, the production prospects out of this area are significantly worse than they were back in April. Overall, the latest crop progress report showed that just 86 per cent of the crop acres had been planted as of 29 May compared to 97 per cent a year ago.
  
  
• There is significant risk of flooding in areas along the Missouri river in South Dakota, Northern Iowa, Nebraska. News reports indicate that the Army Corps is planning to relieve pressure on dams by flooding farmland and this could lead to more lost acres, similar to what happened in the Mississippi Delta. While the estimates of the number of acres that could be flooded vary, it is one more issue that one needs to consider when estimating corn crop supplies that will come to market this fall.
  
  
• And if producers up North are having to deal with the effects of melting snow and excessive rainfall, producers in the Southern states are coping with one of the worst droughts in the last seventy years. Many areas in Texas are experiencing exceptional drought conditions and this will negatively impact corn and wheat supplies coming from there. USDA issued its first crop condition report on Tuesday and overall it showed that 6 per cent of the national corn crop currently in the ground is in poor/very poor condition, 2 points higher than the comparable period a year ago. However, 31 per cent of the corn crop in Texas was rated as poor/very poor. The corn plantings survey in March pegged Texas corn acres at 2.15 million acres, about 2 per cent of the national crop. The winter wheat condition in Texas and surrounding areas is even worse. The crop progress report showed that 76 per cent of the wheat crop in Texas is in poor/very poor condition, compared to just 9 per cent a year ago. Spring wheat plantings are also very behind and this will tend to lift the overall grain complex.

Bottom line: The fact that Russia lifted its export ban may have provided a bit of relief for grain prices but exceptionally tight US corn supplies and production challenges on many fronts will likely cause the market to maintain significant risk premiums in place, impacting US livestock and poultry production for the remainder of 2011 and in 2012.