Wheat
The wheat market opened the shortened week off to a good start trading higher with the main supporting factor concerns about Australia. It appears that the dry conditions have returned and the wheat crop down under has been declining in potential size. Some production reports coming out of Australia are now estimating the crop to be closer to 20 million metric tons compared to 24 million metric tons earlier. May 27's gains were short lived as once the market opened on May 28 all three of the wheat exchanges came under selling pressure. Most of the contracts traded through support lines, which only accelerated the session's losses as the market was forced into sell stops. Most of the early selling pressure was because of news that USDA was going to open up Conservation Reserve Program acres for haying and grazing. Of course the acres will not be allowed to have anything done to them until after July so the hay will have less value for the cattle than if harvested in a timely fashion. But it will displace some corn and wheat that could have potentially been fed. Adding selling pressure was a weaker crude oil market. It seems that all of the commodities have again hooked up with crude and whatever direction it trades, it takes the grains with it on a day by day basis. This was especially true on May 29 when the wheat market tried to trade higher, but a sharply lower crude oil market helped to limit session gains in the wheat contracts.
Wheat harvest is fast approaching for the wheat in the Southern Plain states and Delta regions of the U.S. It does appear that this year's crop could be decent. So far harvest results have the crop as better than average. Dry conditions remain in the upper Northern Plains but that area is certainly decreasing now after this week's rain system moved through much of North Dakota and northern Minnesota. Many traders are not concerned with the dry conditions as it remains early and much of the state has had enough rains to get the crops started well. If the dry conditions continue into late June to early July then traders will start to pay more attention to potential crop concerns. But right now the market will have to start to concentrate on the upcoming harvest and on how to handle the new crop wheat.
Wheat exports sales pace for last week was slightly disappointing. USDA estimated last week's old crop sales pace for wheat at a negative 12.5 million bushels. Most of the old crop wheat sales were moved over to new crop sales as that was estimated to be 33.2 million bushels for last week. This brings the year to date export sales pace for wheat to 1.244 billion bushels compared to 875 million bushels for last year at this time. USDA export inspections report showed wheat shipment for last week at 15.2 million bushels compared to 12.1 million bushels last week. This brings wheat's shipments for the year to 1.198 billion bushels compared to 872 million bushels for last year at this time. There is only one week left in wheat's export marketing year. Technically this was a very good finish for wheat.
USDA estimated 64 percent of the nation's winter wheat crop as headed compared to 49 percent for last week and 76 percent for the five year average. The winter wheat crop rating improved 2 percent to 47 percent good to excellent, 31 percent fair, and 22 percent poor to very poor with ProAg's yield model (figure below) jumping sharply (by 0.5 bushel per acre) to 45.7 bushel (1.5 bushel above USDA). Spring wheat emergence is estimated at 76 percent compared to 54 percent last week and 78 percent for the five year average. Spring wheat's first crop condition ratings for the year has the crop at 52 percent good to excellent, compared to 41 percent fair, and 7 percent poor to very poor -- not very good.
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Corn
Corn planting is nearing completion after improving weather the past week, with 88 percent of the corn officially planted as of May 26. That is up 15 percent for the week, more than the 6 percent average planted so we are now only 6 percent behind the normal pace of 94 percent planted. Corn planting was a near disaster as of May 10, but weather since then along with good old farmer long hours has pushed planting back to respectable levels. With another good week planting this week in the most delayed areas of the eastern Corn Belt, it's likely we gained even more on 'normal' progress. The western corn belt is nearly caught up to average planting pace and is nearly complete with corn planting. The eastern Corn Belt remains the problem area, with the most acute planting delays in Ohio and Missouri but also lingering problems in Illinois, Indiana, Pennsylvania, Kentucky, and Arkansas. The much improved planting situation has pressured corn this week along with a sharply lower crude oil market (following last week's spike).
On June 2, we'll get our first corn crop condition rating. ProAg expects a somewhat ragged condition in the first initial rating as late planting, spotty emergence, and drown out problems show in the first ratings of the year. But conditions should slowly improve from whatever that rating is, as the extended forecast is calling for mostly normal temps and normal precipitation -- almost ideal once the crop is planted. We have a corn crop planted and developing about 7 to 10 days later than normal so this might continue to be a weather risk all summer. But if we get a fairly long season and warm temps, it's also possible we could have an above average crop due to abundant soil moisture levels. Often, soil moisture is our "cushion" against drought and crop loss, so we already have a lot of yield "insurance" (high soil moisture levels are insurance against drought).
USDA this week opened up CRP land for grazing and haying after July 15, and that's likely to lead to less feed demand from cattle growers. The idea by USDA was to allow a onetime haying and grazing harvest after July and August to provide more feedstuffs for livestock producers. However, this won't be high quality hay, as clearly it will be cut about 1 to 2 months later than ideal and be mature hay by that time (it had to be after the all important "nesting season"). The $1.2 billion dollars of feed would probably have been worth 2 times as much if they had allowed earlier use, but alas, economics (or common sense) have never been a part of the political world. This move will ease feed grain supplies as less corn will need to be fed, and more feed available to replace the considerable acres of hay and pasture being torn up for 2008 grain production (3 million acres this year?). Also, while USDA was clear this wasn't an "early out" for CRP land, the practical implications are that it's possible to clear trash from CRP coming out this year or next, making it much easier for producers to convert to cropland in the future. This also sets precedence by USDA that CRP land is available to meet the nation's food and feed supplies, and obviously should be as it is a great resource important to our country. This pressured corn and wheat to hefty losses, and may continue to have a psychological effect on markets long after the move is over. If it's available for hay at no charge, why not let producers crop it and save the entire payment?
Soybeans
The soybean market was topsy-turvy this week, sharply higher one day and sharply lower the next. May 30 we finished with large gains (following a 50 cents down day May 29) to end the week up 3 cents from May 24. The markets are getting more volatile with wildly fluctuating crude oil markets and the expected inflation that usually accompanies the energy price changes. Everyone seems nervous, even grain traders, as oil prices have a direct influence now on bean oil prices (and therefore soybeans) as well as corn (for ethanol). Both corn and soybeans are biofuels as well as foods, so anytime oil markets fluctuate, these markets must also.
It was surprising to see soybean values close higher this week as U.S. planting progress has accelerated the past few weeks. On May 10, we had a disastrous start to the 2008 crop year and it looked like it would be impossible to get the crop planted in May. The past 2 to 3 weeks have been remarkably different, though, and has allowed many states to "catch up" to normal planting progress. The western Corn Belt especially seemed to move ahead, with many states now at or ahead of normal planting progress as of May 25. Fifty-two percent of the soybeans were planted versus 67 percent average, gaining 5 percent on "normal" as we planted 25 percent of the crop last week (versus 20 percent normal). While starting slow, planting progress has accelerated and even this week should have seen significant planting progress. More importantly, the areas that should have gotten the most done are those who are furthest behind (southern Missouri, Illinois, Indiana, Ohio and Pennsylvania). These soggy eastern Corn Belt states are mostly behind normal planting progress, so it's critically important that they get back into the fields.
This week ProAg recommended pricing half of remaining cash soybeans (by fixing futures or buying put options per minnute price contracts), and is also targeting $13.60 November '09 soybeans to start selling 2009 beans. Once the soybean and corn price ration reaches 2.3 or better (2008 December corn is 6.18, November '08 soybeans 13.46 so the ratio is 2.18 (we'd go ahead and advance soybean sales. We are very close to making the first 2009 sale, and really there is no reason to now do so.
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Barley
USDA estimated last week's barley export sales pace for last week at 1,500 metric tons which was made up of new sales of 2,100 metric tons to Canada and a cancellation of 600 metric tons to Japan. Japan bought 7,500 metric tons of 2008 new crop barley. USDA estimated last week's barley shipments at 1.05 million bushels with Japan the only destination. This brings the year to date barley shipments to 37.4 million bushels compared to 19.2 million bushels for the same time last year. As of May 25, 97 percent of the nation's barley had been planted compared to 92 percent for last week and 93 percent for the five year average. Barley emergence is estimated to be at 73 percent compared to 50 percent last week and 76 percent for the five year average. Barley's crop condition rating is estimated at 53 percent good to excellent, 41 percent fair, and 6 percent premium, so the crop is in fair shape, but planted relatively early. Cash barley bids in Minneapolis are at $5.15 for feed and $7.35 for malting.
Durum
USDA reported no durum exports for last week. This brings the year to date total durum export sales pace to 40.2 million bushels compared to 28.1 million bushels for last year. USDA reported no durum shipments for last week. As of May 25, North Dakota producers had 89 percent of the states durum seeded compared to 73 percent last week and 75 percent for the five year average. Durum emergence is estimated at 62 percent compared to 37 percent for last week and 49 percent for the five year average. North Dakota's durum crop is rated at 31 percent good to excellent, 64 percent fair, and 5 percent poor to very poor. This is a 7 percent decline from last week. Basically, durum was planted early into dry North Dakota soils, but since then a fair amount of rain has fallen in western areas. But northern areas (where most of the durum is) has so far not received drought ending rains.
Canola
The Winnipeg canola futures market closed lower for the shortened week. Most of the selling pressure was due to a lower crude oil market. Light pressure came from a weaker U.S. soybean complex and slightly bearish fundamentals. Reports have Canadian producers 90 percent complete in planting. ND producers are estimating canola planting progress at 94 percent complete compared 77 percent last week and 86 percent for the five year average. Emergence in North Dakota is estimated to be at 48 percent compared to 19 percent for last week and 57 percent for the five year average. Minnesota producers are estimating 50 percent of the states canola as being planted compared to 34 percent last week and 78 percent for the five year average. Canada is estimating Manitoba canola planting as being complete while Saskatchewan producers are 90 percent complete. North Dakota's canola crop rating is estimated at 41 percent good to excellent, 51 percent fair, and 8 percent poor to very poor. This is a decline of 10 percent from last year. Cash canola bids in Velva finished May 29 at $26.86 per hundreweight for old crop and $26.61 hundredweight for new crop.
Dry Bean
North Dakota producers are reporting dry bean planting progress at 52 percent complete compared to 11 percent for last week and 38 percent for the five year average. Emergence is estimated at 1 percent compared to 6 percent for the five year average. Minnesota producers are estimating dry bean planting progress at 73 percent completed compared to 30 percent last week and 48 percent for the five year average. Most dry beans states are making good planting progress (Minnesota, North Dakota, Michigan, Colorado and Wyoming).
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Sunflowers
Cash sunflower bids in Fargo declined this week to put old crop sunflower bids at
$29.30 for old crop and $28.40 for new crop. A lower crude oil market seemed to pressure the cash sunflower bids lower. Sunflower planting progress is estimated at 37 percent complete compared to 15 percent for last week and 30 percent for the five year average.
