In an interview last week, National Economic Council Director Larry Kudlow said the phase one trade deal with China is not under attack and is not in any threat of being abandoned. But the trade tensions between the U.S. and China have been increasing.

The U.S., along with many other countries, wants to start an investigation into China’s handling of the initial coronavirus outbreak. The U.S. stopped $50 billion of U.S. pension money from being invested in Chinese stocks and recently made it more difficult for world chip makers to do business with Chinese company Huawei. China retaliated against the U.S. for those moves by putting U.S. companies on an unreliable entities list, which makes it easier for China to launch investigations.

After much delay, the U.S. Department of Agriculture released the details for the Coronavirus Food Assistance Program last week. There seem to be more questions than answers at this point, but at first look it appears that non-specialty crop producers will be getting payments on the lesser of 50% of total 2019 production or the 2019 production not priced as of Jan. 15. Only 80% is being paid up front, with the other 20% held back to see if funds will still be available. Early indications have any grain unharvested will not qualify for payment. Sign up starts May 26 at Farm Service Agency offices. Check out our app for complete details.

Last week’s Crop Progress report was close to expectations and brought nothing new to the table. Corn planting progress was close to expectations coming in at 80% planted versus expectation of 83%. Most states continue to see progress ahead of average. The states that made the best progress this past week were Ohio (24%), Indiana (21%), and South Dakota (16%). The states with the slowest progress continue to be North Dakota (-40%), Pennsylvania (-34%), and Tennessee (-12%).

The slow planting progress in North Dakota is starting to become real. The crop insurance final planting date for corn in most of the North Dakota is May 25, with only the very southeast counties (Cass, Richland, Ransom, Sargent) having a date of May 31. That means North Dakota will have to get 80% of its corn crop planted in less than a week. It is highly likely that North Dakota will fall far short of its intended acreage this year, along with western Minnesota and northern South Dakota.

Will the loss of acres in North Dakota, South Dakota, Pennsylvania, and Tennessee really matter? In the big picture, not likely. But the loss of acreage will cause a shiver in the market as it is likely acres will drop 2 million to 3 million. Production could see a 500 million bushel cut which in turn would reduce stocks to around 2.8 billion bushels.

Corn has been trying to stage a recovery but has not done so very convincingly. The funds are holding a very large short position in corn, USDA is estimating the largest ending stocks estimate since 1987, and production is expected to be a new record. What more needs to be priced into corn at this point? Corn acres falling by 2 million to 3 million would be enough to start getting some attention, but there needs to be more (weather or exports) to give corn strength to stage a significant rally. The return of ethanol demand would certainly help.

Ethanol production continues to show improvements. Last week’s production was estimated at 663,000 barrels per day, up 7.5% from the previous week but off 38% from last year. Stocks are estimated at 23.63 million barrels, a decline of 2% from the previous week and up 1% from last year.

Soybeans have been showing signs of strength on ideas that export demand will continue to improve. China appears to be slowly starting to switch their primary soybean source from South America to the U.S., which most expected would happen in the second half of the calendar year. Planting progress has been a little slower for soybeans, but there is still a lot of time to get soybeans planted. Weather forecasts are showing improving conditions in the six-to-10-day forecast, which should help speed up planting.

As of May 17, soybean planting progress was estimated at 53%, right in line with expectations. Again, the states that are trailing their average planting progress are North Dakota (-26%) and Arkansas (-10%). But the season is longer for soybeans as most states have until June 10 or later to get soybeans planted for crop insurance purposes.

Spring wheat planting progress continues to lag as well. Planting is starting to catch up with 60% of the crop now in the ground versus 80% average. North Dakota is the slowest, showing progress at 41% complete, 35% behind average. Minnesota is 70% planted, 16% behind average. Last planting date for spring wheat for most counties is May 31, so there is time, but it is likely spring wheat acres will fall short of expectations.

Large supplies of wheat and the lack of production concerns has pushed Chicago wheat to new contracts lows last week and has Minneapolis flirting with contract lows. As is the case in most of the grains, wheat has no weather premium. Technically wheat is at a turning point. Support needs to hold, and wheat needs to rally to clean up an oversold market condition. If support fails, wheat will likely test multiple year lows.

Minneapolis wheat is seeing support from planting delays and the idea that not all intended acres will be seeded, not only in the U.S. but also Canada. Forecasts are calling for rain to close out the third week of May in the Northern Plains. Just how much rain falls will determine how much wheat gets planted. The winter wheat exchanges are seeing pressure from improving world conditions as recent rains in the European Union and Russia has improved the potential of those crop dramatically. Rain is in the forecast for Kansas, with the driest areas of the state expecting to see close to an inch or two by the time the system ends. Long term forecasts are calling for dry conditions to return to the European Union.

Cattle have turned mixed with the live cattle market continuing to see strength while feeder cattle struggle. The live cattle market has been supported by a strong cash trade. Cash traded as high as $120 the third week of May on decent volume. Cash bids continue to push higher at a time when boxed beef prices have decreased. The lower boxed beef market is a sign that packing plants are catching up with retail demand. Look for May’s Cattle on Feed Report to give cattle direction to close out the month.

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