Still the same issues in the markets: weather and USDA
The weather and various USDA reports continue to be the main drivers in the markets.
Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.
The second week of May saw wheat rally sharply higher with Minneapolis and Kansas City posting well over $1.10 gains for the week while Chicago picked up about 70 cents. Corn and soybeans saw decent closes, posting gains of 15 to 25 cents (except for July corn which was 3 cents lower). The week started off rocky and ended with some profit taking but saw some impressive gains in the middle of the week.
All Minneapolis wheat contracts traded to new contract highs to close out the week and traded to highs not seen since 2008. Kansas City also traded to a new contract high. December corn also hit new contract highs during the week.
USDA’s May Crop Production estimate gave the grains the strength to trade higher as all of the numbers from the report were friendlier than expected. Wheat also got a shot in the arm from Friday’s noon weather update that switched all short term and long-term forecasts (one to 5 day, six to 10 day, and eight to 15 day) to cool and wet for the northern Plains and western Corn Belt. This will continue to delay planting progress. Overnight heavy rains once again blessed most of the state, which will likely keep producers out of the fields.
A lot of the week’s gains were due to USDA’s May Crop Production report, which was released Thursday, May 12. The biggest surprise came with USDA increasing old crop 2021 wheat export pace. The trade was expecting wheat exports to drop 20 million bushels but instead they increased old crop exports 20 million bushels.
For 2022 USDA estimated wheat production at 1.73 billion bushels, 62 million bushels below expectations but 83 million bushels above last year. But this is likely the highest production estimate for the year. USDA did make a good cut to winter wheat production, but other spring wheat production and durum production was not adjusted at this point. All winter wheat production was estimated at 1.17 billion bushels, 65 million bushels below expectations and 103 million bushels below last year.
USDA did make huge cuts to the hard red winter wheat production. Of the big four producing states, Colorado’s production was reduced 29% from last year, Kansas’s crop was cut 26%, Montana’s increased 38%, Oklahoma’s was cut 48%, and Texas is expected to produce a 44% smaller crop than last year.
In the end, 2022 stocks were estimated at 619 million bushels, 32 million bushels below expectations and 36 million bushels below last year.
Corn’s numbers were not as bullish, but they were friendly. Production was estimated at 14.46 billion bushels, 313 million bushels below expectations and 655 million bushels below last year. The lower production estimate was due to a sharp drop in yield. USDA is estimating corn’s yield at 177 bushels/acre, which was 2.6 bushels/acre below expectations and equal to last year. Corn’s ending stocks estimate was not as friendly as the production estimate coming in at 1.36 billion bushels, 25 million bushels above expectations but 80 million bushels below last year. USDA is currently projecting a 275 million bushels decrease in feed demand and a 100 million bushel decrease in corn exports. It's likely corn demand will increase throughout the year, especially the feed demand number.
The soybean numbers were close to expectations and for once, soybeans were not the bell of the ball. Production was estimated at 4.64 billion bushels, 27 million bushels above expectations and 205 million bushels above last year. Stocks were estimated at 310 million bushels, as expected but 75 million bushels above last year.
Weather has taken over as the main driver for the markets and with the current forecast is look like delays will be in store for the northern Plains and western Corn Belt through the rest of the month while planters are rolling in central and eastern corn Belt. The southern Plains are also expected to see adverse weather conditions as record heat and no rain is expected over the next 10 days. This will likely have an impact on the winter wheat.
The third week of May started off with a bang as wheat gapped sharply higher and extended gains to limit up due to reports that India banned wheat exports and even canceled some existing sales on the books. The ban on wheat exports was due to the hot dry weather conditions they have been experiencing the past few months. The adverse weather is expected to reduce production enough that India is now concerned they will not have enough product to meet domestic demand. Wheat’s gains were trimmed on the rumor India did sell 500,000 metric tons of wheat to Egypt.
Soybeans have been able to trade higher which has traders trying to figure out why soybeans have had so much strength. Most figured it was on the recently announced export sales of soybeans to China and that there were rumors that more sales would be announced soon. It appears that the rally was due to an unconfirmed rumor that Informa’s acreage update has corn acres increasing 2 million and soybeans dropping 1.9 million, but that seems unlikely.
The May 16 crop progress report was supportive to wheat as numbers for spring wheat’s planting progress and the winter wheat crop rating was friendly, but the planting progress for corn and soybeans was as expected. And with a few more days of nice weather, planting progress could reach the average pace for this time of year for corn and soybeans.
The crop progress report was friendly wheat as spring wheat planting progress was estimated at 39% complete, 4% lower than expected by the trade. According to the report 12% of the nation’s spring wheat was planted last week, leaving it 28% behind the 5-year average of 67%. North Dakota producers are reporting spring wheat planting progress at 17% complete versus 8% last week and 60% average. Worse yet, Minnesota is estimating planting progress at 5% complete versus 2% last week and 75% average. At this rate, it appears Minnesota will fall short of getting much spring wheat in this year.
Winter wheat conditions were also friendly with conditions dropping 2% to 27% good/excellent, which was 3% lower than expected by the trade. Colorado was the only state showing an improving crop, up 8% to 19% good/excellent. The rest of the major states all reported lower conditions for the week, Kansas: -4%, Montana: -2%, Oklahoma: -7%, and Texas: -2%.
Corn and soybean planting progress came in as expected but when looking at corn’s numbers, there appears to be an issue brewing in the Northern Plains and western Corn Belt. Corn’s planting progress was estimated at 49% complete, versus 22% last week and 67% average. That means producers were able to plant 27% of the nation’s corn crop last week. Most of the central and eastern Corn Belt states made good progress last week. Illinois was able to plant 40% of their corn crop last week while Indiana put in 29% and Iowa 43%.
As of Monday, only a few states remained that were not showing as impressive progress. North Dakota only has 4% of its corn planted versus 1% last week and 41% average (37% behind average pace). Minnesota is 35% planted versus 9% last week and 72% average (37% behind average). South Dakota is 31% planted versus 11% last week and 54% average (23% behind average). Iowa is 57% planted versus 14% last week and 80% average (23% behind average). Like wheat, it appears that not all of the corn intended acres will be planted.
Soybean planting progress also came in as expected. As of Sunday night, 30% of the nation’s soybeans were planted versus 12% last week and 39% average. Minnesota is trailing its average planting rate by 36% while North Dakota is 22% behind its average pace. But for soybeans there is time.
Weather remains bullish wheat as the northern Plains are expected to see more rain to close out the third week of May. The southern Plains are expected to see hot dry conditions continue, which will result in another lower crop ratings estimate on Monday. The Corn Belt should show good planting progress.
Cattle continue to struggle even with steady to better cash offers. Selling pressure in the meats continues to come from expectations of poor economy. With interest rates increasing and the price of gas hitting new highs weekly, it is becoming more difficult for the average consumer to make ends meet.
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