The race for acres is not over as both corn and soybeans need to add acreage to improve their 2021 supply and demand tables. With the current acreage estimate and leaving all other numbers unchanged from the U.S. Department of Agriculture's February Ag Outlook Forum, corn and soybean ending stocks drop to extremely tight levels. But the issue is there is only one crop that can afford to give up acreage: wheat. All of the other grains are also battling to hold onto their acreage. The big question: Where will USDA plug the potential 3 million acres that are unaccounted for? That likely will not be answered until June.
The April 5 export inspections report continued to show aggressive corn shipments. Corn sales are sitting at expectations, but shipments have been lagging and cast a shadow on the ability to get all of the product moved. But with the seasonal slowdown in soybean shipments, corn has been able to see some impressive weekly shipments. Export sales are slowing down, which is usual for this time of year. At this point, wheat export sales are nearing 94%, but the end of wheat’s export marketing year is also fast approaching (eight weeks). Corn and soybeans still have a significant amount of time until their marketing year comes to a close (22 weeks) and both corn and soybean export sales already are at 99% of expectations.
Now that we are into April, USDA will once again resume releasing its weekly crop progress report. The report is usually released Monday at 3 p.m. This report will be watched closely this year especially at the start of the planting and growing season; due to the lower-than-expected acreage, there is no room for error.
As of April 4, 2% of the nation’s corn was planted versus 2% last year and 2% average. Cotton planting was estimated at 6% completed versus 7% last year and 5% average. Sorghum is 14% planted versus 15% last year and 14% average. Oats is 23% planted versus 26% last week and 28% average. Oat emergence is at 18% versus 24% last year and 25% average.
Winter wheat was 4% headed as of April 4 versus 3% last year and 3% average. Winter wheat crop ratings were at 53% good/excellent, 31% fair, and 16% poor/very poor, down from last year’s rating of 62% good/excellent. The winter wheat crop condition is below the last two year’s estimate at this time but close to the historical average. Soft red wheat’s rating is the third best in eight years.
Spring wheat planting was estimated at 3% complete versus 3% last year and 2% average. North Dakota and Minnesota are both showing 1% planted. Barley is 5% planted versus 4% last week and 4% average.
But the most interesting numbers from the Weekly Crop Progress report came from the Topsoil and Subsoil Moisture Condition rating. As of April 4, topsoil moisture conditions for the U.S. were 65% surplus to adequate versus 92% last year. Most of the Corn Belt continues to have strong ratings while the Northern Plains has extremely low ratings (North Dakota: 8%, South Dakota: 32%, and Montana: 24%).
The same story is being told in the Subsoil Moisture Condition rating. As of April 4, the nation was rated at 64% surplus to adequate versus 91% last year. Again, the Corn Belt states are rating high while the Northern Plains remains low. This shows that most of the U.S. is sitting in good shape moisture-wise except for the Northern Plains. Timely rains will mean a lot. But North Dakota, South Dakota and Montana will need above average rain to get back to normal.
The first week of April closed out the week calling for light rain for North Dakota. The southeast corner of the state was able to pick up a small amount of rain, but a majority of the state missed out on the rain. Good rains fell across South Dakota and southern Minnesota and forecasts are calling for the Midwest to see this rain last over five days with 90% of the region getting rain. Drought is becoming a bigger concern, but at this point, the drought appears to be confined to the Northern Plains.
On Friday, April 9, USDA will be releasing their April Crop Production/Supply and Demand estimate. The report will use the numbers from the March Quarterly Grains Stocks report to help true up the demand picture for wheat, corn, and soybeans. However, the acreage estimate will not show up in a USDA report until the May report, which is when USDA takes its first real look at 2021 Supply and Demand numbers.
In South American news, Brazil is reporting soybean harvest at 78% completed, right in line with the average pace. The second corn crop is now completely planted. Along with the planting progress estimate, officials estimated the second corn crop production to be at 78.3 million metric tons versus 82.8 million metric tons last month. Soybean production estimates came in at 134 million metric tons versus 133.5 million metric tons last month.
Argentina’s corn harvest is estimated to be 13% harvested versus 19% average. Argentina’s early planted corn looks to be below last year’s yields and below expectations but the later planted crop has benefited from recent rains.
In other news, wheat saw one of their first export sales announcements in a long time. Early in the week a 130,000 metric ton export sale of soft red wheat was announced to an unknown destination. China sold another 1.588 million metric tons of wheat from their state reserves but sold only 40% of what was offered. Wheat prices continue to run about $20 to $30 per ton under corn, making it more attractive. Minneapolis is starting to take the leader role in the wheat complex with most of the strength coming from an attempt to convince producers to continue to keep spring wheat in their rotation.
Ethanol production continues to be the bright spot for corn as last week’s production was estimated at 975,000 barrels per day which was up 10,000 barrels from last week and the highest production estimate in 15 weeks. Stocks are estimated at 20.64 million, down 472,000 barrels from last year and a 20-week low.
Soybeans just plain need to buy acreage. At the current acreage estimate, the U.S. will be out of soybeans. At minimum, soybeans need to add 3 million to 4 million acres or demand will have to be severely decreased, which will happen if prices continue to push higher. As expected, last month’s USDA crush estimate was negative coming in at 164.3 million bushels, which was at the low end of expectations and somewhat expected due to the plant closures in February.
Corn and soybeans pushed to new contract highs after the acreage report was released and are holding up at these levels. Wheat pushed higher the day of the report but has waffled since. Producers who has not priced anything should look to make catch up sales and price at least 15% of expected production.
Cattle are starting to make their run. Another record performance in the S&P 500 and Dow Jones, which both traded to new highs recently, helped to give cattle strength. The strength in the economy combined with pent up demand from being locked up for a year has most expecting to see beef demand explode once the BBQ season kicks into gear. Combine that with tighter supplies and you have the perfect storm building.
A stronger cash trade added strength as most bids this week took place at $121. Total red meat supplies are expected to tighten in the second quarter of the year and get even tighter into the third quarter. This will keep demand strong and should support prices in the short term. But producers should consider looking at locking in calves that are being born right now. Fall prices are at extremely high levels, and there are ways to protect calves at extremely attractive levels with very little risk.
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