Ah the weather in the Northern Plains. Where else can you go from the freezer to the frying pan in just a week?
Freezing temps in the last full week of May grabbed attention as it was a little more widespread than expected and affected the soybean crop more than expected. There will be a lot of soybeans in North Dakota and Minnesota that will need to be reseeded, and that is creating problems with finding seed. Spring wheat and corn were affected by the frost as well. Spring wheat should not see any lingering issues, but the corn crop might. Although no reseeding of corn will be needed, the corn that was hit by the frost will be delayed as it will have to start a new plant.
But the big news the first week of June was not the frost; it’s the upcoming weather forecast that has everyone excited. The first week of June is expected to bring unseasonably hot temps to the Northern Plains. Temps are expected to be in the upper 70s Tuesday, mid 80s on Wednesday, then hit the 90s to 100 over the next 6 to 7 days. In addition to the heat, no rain is in the forecast. If realized, this forecast will significantly increase the drought situation in the Northern Plains and result in a lot more crop deterioration.
The Southern Plains are also having their own weather issues. Although production is expected to be large in Kansas, the Southern Plains continue to see rains, which is causing harvest delays and is starting to impact the quality of the hard red winter wheat crop. Most of the crop was already expected to make its way into the feed ration, but at this point it looks like that will be where it will have to go. That creates a strong need for quality spring wheat to blend.
The June 1 Crop Progress report added to the friendly news for wheat. Spring wheat planting progress was slower than expected (97% complete versus expectations for 98%). To top that off, spring wheat conditions dropped 2% to 43% good/excellent, 2% lower than expected. If spring wheat went backwards last week, what do you think it will do this week? Winter wheat conditions were as expected. The report put Minneapolis wheat’s crop condition rating at the second lowest level on record (second only to 1988). Hard red winter wheat is currently rated at the highest level for the year while soft red winter wheat is rated at its highest level ever. White winter wheat conditions are the lowest on record.
What surprised traders the most about the June 1 session was that corn briefly traded limit up. To start off corn did see a lot of spillover support from the strong wheat complex. But corn also had news of its own. The prior week’s export inspections estimate continues to show strong demand as over 2 million metric tons of corn went through the U.S. ports last week. To top that off, last week’s freezing temps in the Northern Plains nipped the corn crop. For the most part, corn will be able to recover without reseeding, but it will delay maturity. That could lead to higher moisture and lower test weights at harvest. Gains were trimmed by the expectation that corn would see a solid crop rating in the Crop Progress report. And it did. Corn planting was estimated at 95% complete, 1% lower than expected, but that was overshadowed by the crop ratings estimate. Corn’s crop ratings were estimated at 76% good/excellent, 6% above expectations. North Dakota is the only state rated below 50% good/excellent, coming in at 48%. South Dakota is next in line at 67% good/excellent. Corn at this point does not have the same story as wheat, but it is going along for the ride.
Soybeans, like corn, played a bit of a follower role. Soybeans do have some friendly news to help push it higher, but the gains were limited. Last week’s frost did a lot more damage to the Northern Plains soybean crop than expected. There will be a lot of soybeans replanted in the Northern Plains and it will result in a delayed harvest. In addition, all of these soybeans are being replanted just ahead of one of the hottest spells for the Northern Plains in history. Light support did come from the Crop Progress report, as once again the trade overestimated soybean’s planting progress by 4% (84% planted vs. 88% expected).
The 2020 wheat export marketing year wrapped up last week and according to this week’s wheat export shipment report, the market year wrapped up with wheat falling 38 million bushels short of USDA projections.
Brazil continues to see its drought conditions worsen as well. It seems that each week another analyst comes out with another lower production estimate for Brazil’s safrinha corn crop. Reports have this as the worst drought in Brazil in 91 years. Dr. Michael Cordonnier, of http://www.soybeansandcorn.com, left his production estimate for Brazil’s corn unchanged at 95 million metric tons and Argentina’s corn production unchanged at 45 million metric tons. Little to no rain is expected to fall in the central regions of Brazil, but the southern region is expected to see some rain.
USDA reported April soybean crush at 169.9 million bushels, slightly lower than the average trade estimate of 171.1 million bushels and lower than last year’s 183.4 million bushels. This is the third month in a row crush has not set a new record for the month. But soybean oil continues to be a force, setting new contract highs the first week of June, breaking the $70 per hundred weight mark and at highs not seen since March 2008.
Cattle are trying to find support, but so far have not been successful. It did not help to have one of the largest cattle slaughtering companies shut down. JBS closed their US slaughter plants due to a cyber-attack on June 1. The company was only shut down for a few days, but that created an even bigger back log of slaughter ready cattle. Feeder cattle continue to follow the grains as which ever direction corn goes, feeders will go the opposite. Reports of cash trading at or near steady money added strength to the live cattle. Reports had cash trading between $119 and $119.50. Cattle’s outlook continues to remain good, but the sloppy trading will likely remain until the backlog of cattle can move through the system. Domestic demand remains strong, and exports remain robust.
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