May brings buyers to the grains

April and May are traditionally the time when uncertainty is at its greatest as harvest pressure is wrapping up in South America while planting is just getting under way in the U.S.

Planting progress continues to lag for the northern Plains.
Agweek file photo

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The first week of May started off as a continuation of April with heavy selling pressure and a dismal outlook for grain prices. But by midweek, and after trading to two-year lows in wheat and one-year lows in corn, the grains seemed to find a bottom, at least for now.

The grains started the first week of May on the defense with early selling tied to South America. Brazil’s record soybean production is causing a bit more of an issue than expected. The large increase in soybean supplies has flooded the ports and is starting to cause a bit of a logistic nightmare. This has resulted in Brazil’s cash bids for both corn and soybeans to crash, making them a lot more attractive in the export market.

Brazil’s crop progress as of April 28 had soybean harvest at 95% complete versus 95% average. First corn crop harvest was estimated at 80% complete versus 83% average.

As of April 27, Argentina was reporting soybean harvest at 32% complete versus 48% average. Corn harvest was estimated at 24% complete versus 34% average. BAGE is saying they will likely continue to lower Argentina soybean production due to very disappointing yield reports coming in.


Wheat took the biggest hit early in the week with selling tied to Stats Canada’s negative acreage estimate as well as from the lack of demand for U.S. wheat. Rain in the southern Plains also added pressure, but it is questionable if it will be of any benefit to the winter wheat crop. Technically wheat broke through support and is vulnerable to see another leg lower. That also means that wheat has no weather premium or war premium, as most contracts are sitting at or near 2-year lows.

Corn struggled as well. Improving weather conditions for the southern Plains added pressure. Weather forecasts are calling for ideal planting conditions for the Corn Belt and improving weather forecasts for the northern Plains. At this point traders seem to think it’s likely the projections for 92 million corn planted acres will be realized. The two China cancellations of U.S. corn added to the pressure as Brazil puts their corn on fire sale.

Soybeans are the market that continues to hold together the best. Although exports have shifted to Brazil due to their soybeans also being on fire sale, traders are concerned that if planting starts to go really well in the Corn Belt for corn, more acreage of corn will get planted and less soybean acreage. And soybeans’ 2023 projected supply and demand estimates already looked tight. Technically soybeans are holding up better than wheat and corn.

The May 1 Crop Progress report did show a slight improvement in the winter wheat ratings, but only 2%, putting the crop at 28% good/excellent, which was as expected.

The hard red winter wheat crop was unchanged (disappointing with all the rain), the soft red winter wheat crop declined slightly (cold freezing temps), and the white winter wheat saw slight improvement.

Wheat planting

Hard red spring wheat planting progress was friendly as it came in at only 12% complete, 2% lower than expected. This compares to 5% last week and 22% average.

North Dakota is only 6% planted versus 13% average while South Dakota is showing progress at 17% versus 40% average. Minnesota has yet to start planting spring wheat.

Corn planting

Corn’s planting progress was estimated at 26% complete, equal to the five-year average. According the state breakdown, Minnesota is reporting 5% planted versus 23% average.


South Dakota is 1% planted versus 10% average. And North Dakota has yet to start planting.

Soybean planting

Monday’s Crop Progress report was slight negative soybeans as it put planting progress at 19% complete versus 11% average and 2% above expectations. Most states are reporting soybeans planting progress ahead of the 5-year average, except for Minnesota which is only 1% planted versus 8% average. North Dakota and South Dakota are reporting no planting progress.

Soybeans were the bright spot in the grains early in the week. Strong demand and expectations that the Census Crush estimate would be friendly added strength. The Census Crush estimate for March put soybeans crush at 198 million bushels versus expectations of 197.3 million bushels. This was a record for March and the second highest crush pace on record.

Early April had the grains sitting at or near resistance levels and the grains were ready to break out. The trouble is that they broke out to the downside as heavy fund selling gripped the grains. April and May are traditionally the time when uncertainty is at its greatest as harvest pressure is wrapping up in South America while planting is just getting under way in the U.S. But for some reason the funds have decided to ignore the fundamentals. Making the recent selloff that much harder to explain.

But that seemed to change midweek. Wednesday, May 3, started off rough with all of the grains extending the previous days selling. Even crude oil was under heavy selling pressure, trading below $65 per barrel before finding support. Whatever came in to support crude oil also supported the grains as all the markets made a significant recovery and by the end of the session Wednesday, most contracts were positive. To add to that, all three of the grains put in a key reversal up formation on the charts. A key reversal is when the market puts in a lower low and higher high than the previous day and closes above the previous day. This is also a formation that could signal a change in the trend. But it needs confirmation which would occur with a higher close in the following session.

What caused the grains to turn and push higher Wednesday? Part of the support was due to technical buying as wheat traded to two-year lows and corn was at one-year lows. The grains were also posting losses in 10 of the last 12 sessions and had lost ground at a steep descent, all of which is not sustainable. Wheat found support in the Oklahoma Wheat Commission report. Their survey put the state’s wheat production at 54.3 million bushels with a yield of 24.4 bushels versus last year’s production of 68.6 million bushels from a yield of 28 bushels.

This will be the lowest wheat production in Oklahoma in nine years if realized and estimates have the harvested wheat acreage to only be 48%, the lowest in 40 years. In 104 years of records, Kansas has an average abandonment rate of 11%. This year the abandonment is expected to be as high as 25%, the second highest only to 1996 when abandonment was 25.4%.

Wheat did post gains on Thursday, verifying the key reversal, but corn and soybeans did not, making their recovery on Wednesday just a dead cat bounce. As an added bonus, all three commodities pushed higher on Friday, giving wheat a weekly key reversal and helping corn and soybeans to close the week with gains.


Weather and planting progress will take center stage the second week of May, also with position squaring ahead of USDA’s May Crop Production report, which will give us the first real look at the 2023 supply and demand numbers. Early indications have the report neutral wheat, negative corn, and friendly soybeans.

Cattle needs some correction

The first week of May had the cattle market on the defense. After seeing the market being supported by a sharply higher cash trade, cattle are seeing cash bids fade back lower as packers become a little more reluctant to buy. This in turn is pulling premium out of the futures market.

Cattle were overbought and in need of a correction, so maybe it would be good to see a $5 to $7 cut before pushing back higher. That would be healthy for the market as it would clean up the weak longs and give new traders an opportunity to enter.

The Federal Reserve interest hike of 0.25% was worked into the marketplace and with the comments that followed the rate announcement it’s sounding like the Federal Reserve will take a wait and see stance on any more increases.

The biggest concern for beef will be domestic demand once the BBQ season starts at the end of May. Will the average consumer pick the higher price beef or will they take the cheaper pork or poultry?

“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

Opinion by Randy Martinson
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