Adverse weather and poor planting conditions push wheat and corn higher
Wheat and corn continue to be the leaders as adverse weather slows planting progress and impacts the potential size of the U.S. southern Plains winter wheat crop and South America’s second corn crop.
The second week of April closed in mixed fashion but as one would have expected from weather forecasts. Wheat and corn continue to be the leaders as adverse weather slows planting progress and impacts the potential size of the U.S. southern Plains winter wheat crop and South America’s second corn crop. Soybeans were the weakest link on expectations for increased acreage as producers in the northern Plains consider switching acreage due to the late planting.
September Minneapolis wheat, corn, canola, soybean oil, and cotton continued to be the main markets, all trading to new contract highs on an almost daily basis. Those markets need to buy acreage or at minimum convince producers to stay with their initial planting intentions. With the recent rally and trading to new contract highs, one would expect a round of profit taking, but every retracement is met with heavy buying. There is also a large amount of speculative buying hitting the market due to inflationary hedging.
Weather continues to be the main driver as the blizzard of the year (and possibly decade) pounded western and central North Dakota. In the long run the snow will be very helpful as it brought much needed moisture to the dry regions of the state, but that is hard to see now. It’s not likely this event will completely erase the drought situation, but it will go a long way in replenishing short topsoil moisture.
It appears that there will be no peaceful end of the war in Ukraine as Putin has come out and virtually said that very thing. He is in this for the long haul, whatever that means. As it is hard to grasp what his intentions are, the war will continue to support the grains as it appears that Ukraine will see a sharp drop in ag production.
This has helped to push bean oil sharply higher. Tight supplies of vegetable oil in the world and the realization that the Black Sea sunflower production will be sharply lower this year has helped push bean oil to new contract highs and help push soybeans back to the top end of their trading range. Expectations of increased demand due to renewable diesel fuel added to the strength.
The long week brought a lot of news to the market. On Good Friday (April 15) there was a long list of export sales announced and to everyone’s surprise, the White House opened up some federal lands for oil drilling. To top that off, we had more weather issues. All of this helped to push Minneapolis wheat back up to its contract highs and corn and canola to new contract highs. Soybean oil gapped higher and traded new contract highs.
The following exports were announced on April 15: 389,000 metric tons of soybeans to China with 121,000 metric tons old crop and 208,000 metric tons new crop, 272,000 metric tons of soybeans to China all new crop, and 177,000 metric tons of soybeans to an unknown destination all old crop.
The March National Oilseed Processors Association crush report was also released on Good Friday. There were 181.76 million bushels of soybeans crushed in March, right in line with trade expectations and a new record for the month of March. Soybean oil stocks were sharply lower than expected.
It appears that old man winter continues to have a grip on the northern Plains. Not only did another system move through on April 17, but forecasts are calling for more. At this rate, there will be no planting activity in the northern Plains or Corn Belt in April and now the first week of May is doubtful. This will reduce spring wheat acres and could start to impact corn acreage. Preventive planting is now starting to become a major concern in the northern Plains.
The April 18 crop progress report was not as friendly as expected but did confirm slow planting. Winter wheat conditions came in at 30% good/excellent, which was down 2% from the previous week and 3% below expectations. Corn planting progress was estimated at 4% complete versus 5% expected and versus 2% last week. Soybeans planting progress was estimated at 1% complete versus expectations of 2%. Spring wheat planting progress was estimated at 8% complete versus expectations of 9% and 6% last week.
China also continues to see planting delays as COVID lockdowns have prevented farmers from leaving the cities. Most farmers come into town to work in off season and with most cities on lockdown due to COVID outbreak, they are not being allowed to return to their farms.
Dry conditions are starting to advance in Brazil with 30% of the region now in some stage of drought. This will start to impact the second corn crop. As of April 14 Argentina’s corn harvest was estimated at 27% complete versus 27% average. Soybean harvest was estimated at 19% complete versus 23% average. As of April 15, Brazil’s first corn crop was 79% in the bin versus 74% average. Soybean harvest was 87% complete versus 89% average.
In a surprising development, the administration will resume selling oil leases. This administration had halted the sale of oil leases, but with energy prices through the roof, measures needed to be taken to start to give the average consumer some relief at the pump. Removing the restriction on E15 ethanol is one way, allowing drilling once again is another, and the third way to help curve price is to resume selling oil leases.
Buying resumed at the start of the third week of April. Corn traded to another set of new contract highs, with the front months breaking above $8 and appearing to be ready to test the all-time high of $8.49 (from 2012).
Wheat played a follower to corn, starting the session higher but then fading to post losses. Early support came from the April 18 crop condition rating which put the winter wheat crop rating at 30% good/excellent, the lowest rating for this time of year in history (for the hard red winter wheat). Weather forecasts are calling for the next five to seven days to remain dry, which will likely result in another lower crop progress report on April 18. Delayed planting in the northern Plains is adding support as expectations have producers not getting into the field until the first week of May. This will likely result in a 250,000 to 500,000 acre decline in this year’s spring wheat average.
In a twist, the crop that has the poorest outlook, soybeans, were stronger. Strong demand and the need to hold acreage supported soybeans. Soybeans are seeing acres being bid away from the consistent new crop highs being hit in canola, corn, September Minneapolis, and cotton. Strong export demand from China has many expecting USDA will once again be forced to increase U.S. exports in their May Crop Production report.
May options expire on Friday, April 22. Stats Canada will release their Planted Acreage Estimate April 26. First notice day will be on April 29.
Cattle were finally able to post a higher weekly close and appear to be on track to end the third week of April on the positive side as well. A stronger cash trade due to adverse weather conditions helped to push cattle higher. Futures are also trading at a discount to the cash market, which has helped support cattle. Position squaring ahead of the April 22 cattle on feed report added support. Early estimates have the on feed number at 100% of a year ago, placements at 92%, and marketing at 98%. Maybe this will finally be the push cattle need to turn higher.
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