Planting progress strength met with eroding grain markets
Columnist Randy Martinson notes that the northern Plains continue to see slow planting progress in North Dakota while Minnesota and South Dakota have been able to catch up to their average pace.
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The third week of May was a rough week for the grains.
The markets slowly eroded as the week progressed to end with heavy losses. Early support came from USDA’s May Crop Production report. The report was friendly wheat and that strength spilled over to help push wheat higher to start the week, and that strength spilled over into the other grains as well.
But by the end of the week, selling had dominated the grains with Minneapolis wheat dropping over 40 cents, Chicago wheat down 30 cents, Kansas City wheat down 50 cents, corn down 32 cents, and soybeans giving up 83 cents.
The May 15 Crop Progress report added pressure to corn and soybeans, which seemed to start the domino effect. As of May 14, 65% of the nation’s corn crop was planted versus 59% average. That was 3% below expectations but still a very strong percentage of the crop has been planted early, which leans toward higher yields. But there are a few rocky spots.
The states that are trailing in planting progress are: Colorado: 9% behind, Kansas: 1% behind, Michigan: 6% behind, North Dakota: 21% behind, Ohio: 8% behind, Texas: 3% behind, and Wisconsin: 12% behind.
Soybean planting progress was estimated at 49% complete versus 36% average. This is 2% lower than expected by the trade but still one of the fastest planting paces in recent memory. The states that are trailing behind are: Minnesota: 7%, North Dakota: 13%, and Wisconsin: 6%.
Spring wheat planting progress was estimated at 40% complete versus 57% average, 1% above expectations. Also, almost every major spring wheat producing state is trailing behind its average planting pace. Only South Dakota and Washington are ahead of average. North Dakota and Minnesota are trailing their average progress pace by 26% while Idaho is 13% behind and Montana is 7% behind.
Winter wheat conditions were left unchanged at 29% good/excellent, 1% below expectations. The crop rating shows a slight improvement in the hard red winter wheat crop and also in the white winter wheat crop but steady conditions in the soft red winter wheat crop.
There is definitely a shortage of old crop corn, as the spread between July and Sept increased to an all-time high of 82.5 cents Monday. The shortage of corn will keep that spread at high levels, but it is also keeping July corn from retreating too much.
Tuesday was a rough session for the grains, at least for most of the session. It was a risk-off session for the commodities as all of the markets were lower at the start of the day. Monday’s Crop Progress report started the ball rolling downhill as although planting progress has slowed, the report continues to show corn and soybean planting moving at close to record pace. Spring wheat and barley continue to be the crops showing the slowest progress. But weather forecasts are calling for above too much above temps for the northern Plains and average moisture. This will hopefully help producers catch up.
The northern Plains, or more specifically eastern North Dakota, western Minnesota, and northern South Dakota continue to see wet conditions. The recent above normal temperatures are going to help get fields dried out and producers back in the field. But there is going to be prevented planting in this region. It likely won’t be as large as last year, but at this point it is easy to assume hard red spring wheat and corn acreage could each drop by 500,000 acres.
In world news, Buenos Aires Grains Exchange is estimating Argentina’s 2023 wheat production at 18 million metric tons versus 12.4 million metric tons last year. But the jury is still out on this as most of Argentina remains dry. If that trend continues, wheat average will decline along with the production estimate.
SovEcon is now estimating Russia’s wheat crop at 88 million metric tons, up 1.2 million metric tons from their previous estimate.
The rest of the week also saw heavy selling as washout Wednesday was followed up by thumping Thursday. The funds and money flow have command of the markets and at this point are determined to drive the grains lower. The market is very inefficient short term as emotion is the main driver day to day, but long term the market is efficient in finding price. But sometimes that means the market has to trade to extremes, too high and too low to average out at the correct price. It appears we are experiencing the low side right now.
The week’s selling pressure was enough to push corn down to a 62% retracement from the recent high, which should be a very strong support line. December corn broke through the $5 level, which is the approximate level that corn could start to see crop insurance indemnities. Which should give the market an incentive to bounce.
The northern Plains and western Corn Belt are expected to see rain on and off for the next two weeks. Temperatures are expected to be above normal which will help create a greenhouse effect for the planted crop, but it may become difficult to plant the late season crops if the rain amounts start to build.
The biggest disappointment this week came from wheat’s reaction to the Wheat Quality Tour. The tour found poor conditions in both Kansas and Oklahoma with both states reporting a sharp increase in abandonment. Kansas' wheat production is estimated at 178 million bushels, which will be the lowest in 66 years while Oklahoma’s wheat production is estimated at 41 million bushels, the lowest on record, if realized.
But the Wheat Quality Tour was overshadowed by the news that the Black Sea Grain Initiative was extended for another 60 days. This should not be bearish to the grains as it is only a continuation of what has been occurring, nothing new. But most were expecting the agreement to not be renewed due to the tough talk from Russia.
Buenos Aires Grains Exchange once again lowered their estimate of Argentina’s soybean production estimate. The group is now projecting Argentina’s soybean crop to come in at 21 million metric tons, a drop of 1.5 million metric tons from last month.
With Brazil’s production still estimated at 155 million metric tons, that brings the 2022 combined South American soybean production to 176 million metric tons (if estimates are correct) versus 174.4 million metric tons last year.
Cattle performing well
Cattle put in a strong performance the third week of May. USDA’s May Crop Production report continues to show declining production estimates, not just for 2023 but also for 2024. Tight supplies and reports of a decent cash trade added support.
The May Cattle on Feed report was neutral coming in as expected. The report estimated: On Feed: 97%, Placed: 96%, and Marketed: 90%.
The question that everyone has had on their minds will soon be answered. Will the average consumer continue to choose beef once the BBQ season kicks into gear, or will they settle for cheaper protein sources? If demand remains strong, it is likely live cattle and feeder cattle prices will remain strong throughout the summer.
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