The grains seem to be stuck in a rut. Last week’s impressive export sales of 1.156 million metric tons and 1.224 million metric tons of corn to China did little to move the market. Or did it? Maybe the export sales were the only reason that corn stayed on the plus side while the other grains traded mixed due to most of the short-term news turning negative.
Weather has turned to be negative in the short term as rains have covered the U.S. Southern Plains recently. The rains have helped improve the winter wheat crop. The rain was not enough to be a drought ending event, but it certainly has helped, and it might just have been the system that changes the weather pattern.
South America’s weather has also turned negative to the grains. Unexpected rains in Argentina turned out to be better than expected. But again, the rain was not enough to reverse the damage done to the corn and soybean crop in Argentina. But it has been enough to stabilize the crop for the short term.
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The biggest news is the weather for Brazil. Forecasts are calling for the rain to move out of the country by the end of the month and for drier conditions to dominate. Of course, this will help get soybean harvest rolling forward and it will help wrap up the planting of the second corn crop. But the potential change in the rains could result in a bigger decrease in the size of the second corn crop. There are reports that the Mato Grosso soybeans are averaging about 9% damage due to sprout from the heavy rains.
Brazil is reporting harvest of its first corn crop at 52% complete versus 45% average. Planting progress for the second corn crop is at 72% complete versus 90% average. Soybean harvest progress gained 12% in the last week to 46% complete versus 55% average with the Mato Grosso region (27% of the nation’s crop) now at 80% versus 88% average.
Buenos Aires Grains Exchange released its latest production estimates for Argentina, following suit with other analysts by reporting lower production. They are now estimating the corn crop at 45 million metric tons (a decrease of 1 million metric tons) and soybeans at 44 million metric tons (a decrease of 2 million metric tons).
As for the U.S., the 2021 crop year has begun. Although the National Crop Progress report has not started as of yet, there are individual states reporting, mainly in the Southern Plains. The March 15 report was negative to the U.S. markets as the report showed what most were expecting, a small improvement in the winter wheat crop because of weekend rains. The report showed the following: Colorado: 25% good/excellent (+6%), Kansas: 38% good/excellent (+2%), Oklahoma: 57% good/excellent (+4%), and Texas: 27% good/excellent (no change). Oklahoma’s crop was 15% jointing versus 2% last week and 16% average. Texas’s crop was 22% headed vs 21% last week and 7% for the 5-year average. And traders are expecting the conditions to improve again in next week’s report due to this week’s favorable weather forecasts.
As for spring crops, Texas continues to make progress on corn planting. Texas is reporting planted progress at 26% as of last Sunday versus 10% last week and 26% average.
The grains started last week on the defense but made an impressive recovery during the day session. Technically, the grains had traded to support, and the market was able to bounce off those support lines. It shows that the market is not ready to give up quite yet. But what was also interesting in the early week run was that old crop that had the most strength while new crop seemed to mark time. The acreage estimate might have been enough to keep the new crop flat but the old crop contracts rallied to post double digit gains. This is a signal that supply is tight and that end users are going to have a tough time securing product. This is also being seen in the extremely strong old crop corn and soybean basis levels. Maybe the Quarterly Grains Stocks estimate will shine a light on supply and confirm tighter than expected stocks.
Last week’s export shipments pace added to the support. Corn shipments had been lagging due to the aggressive soybean shipments pace, but now that the soybean shipments have slowed, corn shipments can resume, and boy did they. Last week’s corn shipments pace was the second largest since 1989.
Soybeans were taken aback by the sharp decline in February’s National Oilseed Processors Association Crush estimate. The decline was enough to push traders to start to unwind long bean oil/short soybean meal spreads. NOPA’s report estimated the February crush pace at 155.158 million bushels, sharply lower than the average trade estimate of 168.6 million bushels. Stocks were also lower than expected at 1.757 billion pounds versus estimates of 1.839 billion pounds. The sharp decline was attributed to plant shutdowns during the arctic blast in February.
The wheat market has come under pressure and is testing support lines. The lack of demand for the U.S. wheat crop and potential increase in production due to improving conditions has the winter wheat markets on the defense. But Minneapolis wheat is trying to hold on to its gains in an attempt to hold onto acres. Competition for acreage in the Northern Plains is heating up and at this point it would be easy to switch spring wheat acres over to canola or soybeans.
The key for wheat depends on corn and soybeans. At this point, traders are reluctant to push the grains too much more into the red as every sell off is met with increased demand. And this market is trying to ration supply due to tight stocks. It is very likely we will continue to waffle around like this until the Prospective Planting estimate is released at the end of the month. Once the market is comfortable with 2021 production, then the story might change a little. Until the market sees that, it is likely the grains will stay in the established trading range.
Private analysts are already starting to release estimates for the March 31 Prospective Plantings report. The first set of estimates has all wheat acreage at 46.4 million versus the Ag Outlook’s estimate of 45 million and last year’s 44.3 million. Winter wheat acreage is estimated at 32.2 million versus 31.99 million in the U.S. Department of Agriculture's January report and versus 30.4 million last year. Other spring wheat was estimated at 12.47 million versus 12.3 million last year. Durum came in even with last year at 1.7 million. Corn acreage is estimated at 92.8 million versus 92 million from the Ag Outlook Forum and 90.8 million last year. Soybean acreage is estimated at 90.3 million versus 90 million from the Ag Outlook forum and 83.1 million last year. If realized, this would be slightly bearish.
Cattle finally started to trade higher. The stock market struggled midweek with February retail sales and manufacturing coming in sharply lower than expected. That has slowed down the cattle market as it has traders worried about the economy. But the February slowdown was likely due to the shutdown from the Arctic blast and not a trend. The Arctic blast also lowered slaughter weights and slowed down cattle movement. Cash has continued to be disappointing, trading at $114 for the past six weeks. Position squaring ahead of March’s Cattle on Feed report added support to cattle last week. Early estimates for the report are: On Feed: 102%, Placed: 98%, and Marketed: 97%.
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