Traders are starting to focus on U.S. weather forecasts now that production attention has shifted to the U.S. And those forecasts are starting to show adverse conditions are on the way.
The first week in May, heavy rains fell over much of eastern North Dakota and western Minnesota. The recent rains combined with the current forecast will likely keep producers out of the fields this week and most of next week. If that assumption is correct, it puts most producers back in the field by May 20 at the earliest. How much wheat and corn will still be planted if that is the case? The last plant date for corn is May 25 or May 31 (southeast corner of ND) and May 31 for wheat.
At this point, it is likely North Dakota will lose between 1 to 1.5 million acres of corn and could see a drop in spring wheat acres as well. The incentive is not there to mud a crop in this year, so producers are likely to stop planting on the final planting date. And at the rate this spring is going, those acres will not switch to soybeans or sunflowers but will be put into prevented planting.
The next three-to-five-day forecast is calling for extremely cold temperatures to return to the Northern Plains. Freezing temperatures are expected for the next five nights with temperatures dipping as low as 26 degrees.
The six-to-10-day forecast (valid for May 11 to 15) is calling for the eastern two thirds of the country to see extreme below normal temperatures while the far western states will see normal to above normal temperatures. Precipitation is expected to be normal to below normal for the Northern Plains, central and eastern Corn Belt and Delta, while above normal rain is expected for the Southern Plains.
The eight-to-14-day forecast moderates slightly and starts to show a warming trend and wetter conditions.
The grains got some direction from the first crop progress report of May. Although spring wheat planting progress is trailing behind its average pace, activity was better than expected. North Dakota's progress was the slowest at just 15% complete versus 33% average. Cool, wet conditions in much of the state continue to hamper activity. Montana is 11% behind average while Minnesota is 24% behind its average pace.
Winter wheat conditions were up 1% to 55% good/excellent (expectations were for conditions to be unchanged to down 1%). South Dakota and Texas were the states hit with the biggest declines, 6% and 7% respectively. The rest of the states only saw minor adjustments from the previous week. Winter wheat heading is behind the average pace, estimated at 32% complete versus 38% average. That might be a blessing for wheat producers with below freezing temperatures in the forecast.
Producers continue to plant corn at a breakneck speed. As of Sunday, May 3, 51% of the nation’s corn had been planted. That is up 24% from the previous week (1% ahead of expectations) and is now 12% ahead of average. The states posting the best progress last week were Nebraska, at 41% planted, Iowa at 39% planted, Minnesota at 36% planted, South Dakota at 30% planted, Illinois at 19% planted, and Indiana at 15% planted. North Dakota is on the board, getting 4% of its corn planted last week but is 15% behind average. Other states behind in corn planting are Missouri at 23% behind, Ohio at 10% behind, and Pennsylvania at 15% behind.
Soybean planting is also ahead of pace as 23% of the nation’s soybeans are in the ground, 5% more than expected and an advancement of 15% from the previous week. Soybean planting progress is 12% ahead of average, which with the current weather forecast might not be a good thing. Soybeans are much more susceptible to frost than wheat or corn, depending on stage of growth. Iowa (37%), Minnesota (30%), and Nebraska (24%) took the honors with the best progress for the week.
Stats Canada released its acreage estimates May 7. The report was slightly friendly to the grains as Canada looks to be planting less of the crops the U.S. is expected to increase. Canada is expecting to plant 25.4 million acres of wheat in 2020, up 3.3% from last year but in line with expectations of between 24 million and 26.3 million acres. Spring wheat acres are expected to remain steady at 18.77 million while durum acreage is expected to jump 7% to 5.23 million.
Corn acreage in Canada is expected to be a little negative because of a 3% increase to 3.8 million (3.69 million last year and expectations for 3.5 to 3.7 million). Soybean acreage is estimated at 5.2 million versus expectation of 5.5 million. This would be a decrease of 9% from the previous year. Canola acreage also is expected to drop 2% to 20.6 million, which was in line with expectations (20.5 million to 22 million).
The U.S. Department of Agriculture will be releasing updated 2019 World Agricultural Supply and Demand estimates and their first look at the 2020 Supply and Demand numbers on Tuesday, May 12. This report is not expected to be friendly to the grains.
Wheat will likely not hold much in the way of surprises. The average trade estimate has all wheat production estimated at 1.85 billion bushels versus 1.92 billion bushels last year. Old crop wheat stocks are estimated at 969 million bushels versus 970 million bushels last month. New crop stocks are estimated at 818 million bushels.
But corn and soybeans could be shocking. The biggest concerns are how much USDA will cut ethanol demand and how much above trend USDA will put the corn yield estimate (due to rapid planting progress in Minnesota and Iowa). Early estimates have corn production at 15.75 billion bushels with a yield of 177.7 bushels. Old crop ending stocks are expected to be 2.26 billion bushels versus 2.09 billion bushels last month due to expected cuts in feed and ethanol demand. New crop 2020 ending stocks are estimated at 3.4 billion bushels. If realized, that would be the highest since 1987’s 4.26 billion bushel ending stocks estimate. Staggering to say the least, but also likely the worst number we will see for the year.
Early estimates for soybeans have the 2020 production at 4.14 billion bushels with a yield of 49.8 bushels. Old crop ending stocks are expected to be 497 million bushels versus 480 million bushels last month. 2020 stocks are expected to be 440 million bushels.
Trade issues are also on traders’ minds as it appears the White House is pushing the idea of placing tariffs on China in retaliation for their coronavirus response. The threat of tariffs could not come at a worse time for U.S. agriculture. Corn’s major demand sources (feed and ethanol) are seeing dramatic cuts. China and Mexico have been the two most consistent buyers of U.S. products as of late, so the threat of tariffs might result in lost export potential.
After seven straight weeks of decreasing ethanol production estimates, the May 1 ethanol production report reversed that trend. Production was estimated at 598,000 barrels per day, up 11.4% (61,000 barrels) from the previous week but down 42.3% from last year. Stocks were estimated at 25.6 million barrels, down 2.8% (725,000 barrels) from the previous week but up 14% from last year.
Cattle finally found support and have since pushed to post strong gains. Live cattle’s discount to cash was supportive early in the week, but tight supplies and rationing beef sales on the retail level added support. Boxed beef prices continue to push to all-time highs each day and that is adding to the strength in the futures market as futures, cash and boxed beef prices can not separate too much more than current. The integrity of the market depends on it.
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