Well, the May Crop Report is out of the way and although some of the numbers are questionable, these are the numbers that are going to set the tone for the grains at least until the end of June. In reality the report was not as earth shattering as most were leading it up to be, but there were a few surprises and assumptions that resulted in the report to be a little more negative than expected.

The adjustments to the old crop wheat numbers were in line with expectations. The U.S. Department of Agriculture's big change to old crop wheat was a decrease in exports which was expected since sales have not been as strong as projected. With three weeks left in wheat’s export marketing year, it seems unlikely sales will pick up.

On the new crop side for wheat, the 70 million bushels increase in feeding was justified as the high price of corn has shifted some feeders to wheat in an attempt to cheapen up the feed ration. The change in wheat that raised the biggest red flag was that exports were estimated at 900 million bushels, a decline of 65 million bushels from 2020.

One the world side what stuck out was a 9.7 million metric ton drop in old crop European Union production. For the 2021 crop year, USDA increased Argentina’s production 2.9 million metric tons, lowered Australia’s 6 million metric tons, lowered Canada’s 3.2 million metric tons, increased EU 8.1 million metric tons, and increased Ukraine 3.6 million metric tons. With the production adjustments in other countries, it is questionable that U.S. exports should decline so much.

In the end, the report was negative for both old crop and new crop wheat. But on the positive side, this is the fifth year in a row where wheat ending stocks dropped year over year.

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The corn numbers brought a few more questions. The old crop numbers came in close to expected but were friendly due to the 100 million bushel increase in exports, putting exports at a record 2.775 billion bushels.

The questions really started to fly from the new crop numbers. Most are questioning the ability for the U.S. to hit a 179.5 bushel yield. This would be the highest yield for corn in history, by 3 bushels. With early planting and weather forecasts for the Corn Belt that sound like a greenhouse type weather, maybe. But the dry conditions in the Northern Plains and western Corn Belt are going to have to be watched as this area holds a lot of new corn acreage. The two new crop demand items that stand out were the increase in ethanol, which is justified due to increased demand in ethanol and tight supplies. The 325 million bushel decline in exports was a tough number to see. The decrease in exports is due to an expected increase in production in South America (Brazil up 16 million metric tons and Argentina up 4 million metric tons), which seems a bit aggressive. Not to mention an increase in Ukraine’s production by 7.2 million metric tons and China’s 7.3 million metric ton production increase. All of which are direct competition with U.S. exports. In the end, the report was friendly old crop corn but negative new crop.

For soybeans, it seemed odd that USDA did not increase old crop exports. With 16 weeks left in the marketing year, soybean exports are at 99% of expectations, and USDA left soybean exports unchanged. That was a disappointment to the trade.

On the new crop numbers, USDA increased crush (which was in line as the vegetable oil markets have gone wild) but decreased exports by 205 million bushels. That seems a bit high until you look at the expectations for Brazil to increase production of soybeans 8 million metric tons and for Argentina to increase production 5 million metric tons. In the end though the soybean estimates were friendly both old and new crop.

As stated, the Crop Production report brought up a few concerns, but the third week of May’s weather forecast backed up the findings in that report. The grains started the week in what looked like a race for the door and the last person out got stuck with the check. It was enough to push wheat and corn to strong support levels while soybeans have only seen small losses.

Minneapolis wheat was under heavy selling pressure due to improving fundamentals. Heavy general rains are in the forecast for the Northern Plains starting May 20. This rain, if realized, could be a game changer for the Northern Plains. It’s unlikely that one event could end the drought, it certainly could be the beginning of the end. Canada is expected to see good rains as well. The selling pressure was enough to result in Minneapolis wheat seeing a 50% retracement.

But the May 17 Crop Progress report was slightly friendly to the grains. Planting progress continues to be far ahead of the average pace, and emergence is starting to approach average, but the weekly pace came in slower than expected. In addition, winter wheat conditions declined instead of improved.

Spring wheat planting progress was not as advanced as expected, which is a sign that producers in the western half of North Dakota are waiting to plant until rains come. Planting progress was estimated at 85% complete versus expectation of 86%. Only Montana and North Dakota have acreage left to plant.

Corn planting progress was likely the most bullish. The report showed planting progress at 80% complete, 4% less than expected. Planting is still 12% above average. The only states lagging behind in planting progress are Kansas, Ohio, and Colorado, all extremely wet regions. On the negative side, corn emergence has sharply improved and is now above the average pace.

It appears that producers concentrated in planting soybeans last week, as soybean planting progress was 3% above expectations. The warm wet conditions also aided in fast emergence as soybean emergence remains above average.

To everyone’s surprise, winter wheat conditions saw declining crop ratings. Most were expecting to see conditions improve after the recent rains and warmer temps, but instead the crop declined 1% from last week, 2% lower than expected.

The past two-week pullback in wheat has resulted in wheat losing 50% of its recent gains. Better than expected weekend rains in the Southern Plains started wheat on the defense but forecasts for heavy general rains for the Northern Plains kept selling pressure heavy in Minneapolis. The unwinding of long Minneapolis/short winter wheat spreads added pressure. Losses were trimmed slightly by Informa’s latest crop acreage estimate for other spring wheat. They are now estimating other spring wheat acreage for 2021 at 11.6 million versus 11.7 million from the March Intentions estimate and versus 12.25 million last year.

Wheat saw selling intensify late in the week due to the first yield estimate of the wheat quality tour. The projected yield came in at an all-time record 59.2 bushels versus 41.9 bushels average. Spring wheat will have its first crop condition rating reported in the next report.

Corn, like wheat, also saw a significant pull back the past two weeks. Although corn is still experiencing tight supplies and strong demand (which was evident from last week’s export shipments pace), corn could still stage a significant selloff.

China has been an aggressive buyer of U.S. new crop corn. In the past two-weeks, China has bought 9.5 million metric tons of US 2021-22 corn. Of course, this is China hedging their bets. China expects Brazil’s production to decline to the point that supplies will not become available. If Brazil’s crop comes through, then maybe the US could see some cancellations.

But the exports sales were not enough to overcome the May 14 acreage estimate from Informa. They are now estimating 2021 corn planted acreage at 96.8 million acres versus 91.1 million from the Planting Intentions report and versus 90.8 million last year. The increase in acreage has the potential to push 2021 corn ending stocks above 2 billion bushels.

In what could end up as being the catalyst to help corn stage a strong recovery, U.S. ethanol production shot up the highest level in 61 weeks. Production was at 1.03 million barrels per day, an increase of 53,000 barrels from last week. Stocks were estimated at 19.43 million, up 40,000 barrels from the previous week. The report helped corn stage a recovery going into the May 19 close, erasing most of the day’s losses.

Soybeans struggled but managed to hold up much better than wheat and corn. Early selling pressure came from April’s NOPA crush report which put the month’s crush estimate at 160.31 million bushels, sharply lower than the average trade estimate of 168.7 million bushels.

Most of the support in soybeans has been coming from the sharply higher U.S. soybean oil market. Soybean oil has consistently put in new contract highs due to the sharp increase in biofuels. Per the U.S. Soybean Export Council, soybean oil used to make up 30% to 35% of the value of soybeans but now it’s closer to 40% to 45% as biodiesel is taking off in the U.S. with rapid plant expansion on the horizon.

Cattle traded mixed last week. Live cattle tried to push higher with strength coming a steady to stronger cash trade. Cash did trade between $119 and $120 this week. Light support also came from reports that Argentina will halt all beef exports for the next 30 days in an attempt to control domestic price inflation.

Position squaring ahead of the May 21 Cattle on Feed report was also evident. The average trade estimate for the report has On Feed at 104%, Placed at 121%, and Marketing at 133%. These numbers are to be taken with a grain of salt as they are compared to last year’s COVID-19 influenced numbers.

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