This article was written right after the U.S. Department of Agriculture released its May Crop Production report. At this time, it has been a rough week for the grains with most posting significant losses for the first time in months. Is it a sign that the party is over? Unlikely, but it certainly has brought reality back into the marketplace.

The markets were very volatile this past week starting with a severe beating on Monday, May 10, due to better-than-expected rains in western North Dakota. This was followed by a decent recovery on Tuesday, May 11, as traders felt Monday’s losses were overdone. But the wheels came off the bus on Wednesday, May 12, once USDA’s Crop Production estimate was released. But not all of the grains came under pressure. Soybeans continued to find the resilience to keep on forging higher.

The selling came from many different directions as technical selling, profit taking, position squaring, and improving growing conditions all pressured the market. The grains were tired and needed a break. The grains cannot rally higher every day. You need to see setbacks once in a while and Monday was it. In reality, nothing really has changed from last week, other than rain in western North Dakota.

Monday’s Crop Progress report continued to show rapid planting progress. Spring wheat planting progress was estimated at 70% complete, slightly higher than expected by the trade and 19% ahead of average. Producers planted 21% of the nation’s spring wheat last week. Minnesota producers were able to plant 25% of their crop while North Dakota producers planted 24%.

Corn planting was estimated at 67% completed, as expected by the trade and 15% ahead of average. Producers were able to plant 21% of the nation’s corn crop last week. Emergence has not kept pace with planting, though. As of May 9, only 20% of the crop had emerged versus 19% average.

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Soybean planting progress picked up a little speed, according to the May 10 crop progress report. As of Sunday, 42% of the nation’s soybean crop was planted versus 22% average and 2% above expectations. Producers were able to get 18% of the nation’s soybeans planted last week, pushing planting 20% ahead of average. But unlike corn, soybean emergence is good at 10% versus 4% average.

Pasture and range conditions improved slightly from the rains last week. Conditions improved 2% to 24% good/excellent. Topsoil moisture conditions improved 3% last week to 66% surplus to adequate. North Dakota was at 20% surplus to adequate, up 3% while Minnesota dropped 9% to 56%. South Dakota was unchanged at 33%. Subsoil moisture levels did not fare as well, only improving 1% to 63% surplus to adequate. North Dakota was unchanged at 19%, Minneosta dropped 5% to 60%, and South Dakota remained unchanged at 30% surplus to adequate.

Wheat came under heavy selling pressure to start the week with most of the selling tied to better than expected weekend rains in western North Dakota. However, the rains were very isolated. But the expectation that this system primed the pump and that more rain would follow helped keep pressure on wheat. The May 10 long term weather forecasts was calling for more precip for the Plains late in the week as well as in the six- to 10-day and eight-to-14-day forecasts. But as the week progressed, the chances for rain diminished.

Corn is stuck between the continuing friendly outlook for old crop corn and the beginning of bearish new crop fundamentals. Tight old crop supplies have helped keep basis levels at extremely tight levels and there appears to be no sign of that demand slowing. Ethanol production continues to be strong as ethanol margins and stocks continue to tighten. The May 7 ethanol production report put ethanol production at 979,000 barrels per day, up 27,000 barrels from the previous week. Stocks were estimated at 19.39 million barrels, a drop of 1.047 million from the previous week.

Export demand for corn remains strong as China and Mexico bought U.S. corn. To start the week. China bought 1.02 million metric tons of 2021 U.S. corn, the fifth largest sale on record. But China also canceled 280,000 metric tons of 2020 U.S. corn. Later in the week, China was back in and bought another 680,000 metric tons of 2021 U.S. corn. To close out the week, Mexico bought 100,000 metric tons of U.S. corn split between 30,000 old crop and 70,000 new crop.

Weather has been a mixed bag for corn. Hot and dry conditions in Brazil continue to reduce the potential size of the safrinha corn crop. And forecasts are giving few chances for rain through the third week of May. Brazilian officials did lower their production estimate for the safrinha crop to 79.8 million metric tons versus 82.6 million metric tons last month. Harvest progress is advancing at a decent pace for the first corn crop as officials are reporting harvest at 89% complete versus 91% average. For the U.S., dry conditions have allowed for rapid planting progress, but the cool dry conditions have slowed down emergence. Long term weather forecasts are calling for above normal temps and above normal precip, virtually giving the Corn Belt a greenhouse effect.

Soybeans gapped lower to start the week, posting solid losses early, but then spending the rest of the week posting new contract highs. Selling was tied to expectations for above average planting pace in the May 10 Crop Progress report. The big news this week was that ADM announced that it will build a soybean crushing plant near Spiritwood, N.D., that will be able to process 150,000 bushels per day. The July soybean contract closed above $16 this past week. That was the first time soybeans closed above that mark since September 2012.

But all of the traders’ attention switched to the May 12 crop production report midweek. The report was negative both old and new crop wheat, but a little less negative new crop as it does show stocks declining year over year. The report was friendly old crop corn but negative new crop corn as new crop stocks are estimated to be 250 million bushels higher than this past year. For soybeans, the report was friendly for both old and new crop as stocks will remain tight.

Cattle finally started to see some strength this week. Technical buying and strong demand continued to help give cattle support. Feeders were supported by the softer grain complex. Cash did trade at steady to better this week which added to the push. Cash bids from the FCE Online Auction were reported taking place between $119 and $120. Gains were kept in check from the May 12 disappointing beef production estimate, which put 2020 beef production at 27.17 billion pounds, up 22 million pounds from last month. 2021 production was estimated at 27.9 billion pounds due to production increases in quarter two of 30 million pounds, quarter three of 55 million pounds and quarter four of 180 million pounds. We are now in the third year of the trade agreement with Japan. That means their beef import tariffs drop to 25% and the quota of beef for that level increases to 251,776 metric tons.

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