Canada's dry and US corn crop is off to a slow start
The wheat markets experienced very choppy back and forth trade this week on drier weather forecasts that favored the breaking up of the wet cycle for the hard red winter wheat area, but expanded drought conditions in Canada.
Weekly crop ratings showed spring wheat is 93% planted compared to 96% for the five-year average. Trade was expecting 92% to 94%. Emergence is at 69% versus 84% average. Spring wheat ratings are 83% good to excellent. This compares to 70% good to excellent last year at this time. Barley ratings are also 9 points higher than last year at 88% good to excellent. Oats conditions improved 4% from last week to 62% good to excellent. Winter wheat conditions improved 3% to 64% good or excellent which seemed to catch everybody off guard leading to steep declines in June 4 trade. Winter wheat headed is at 76% compared to 84% for the five-year average.
The wheat markets sold off in June 4 and 5 sessions on weather models showing less moisture chances for the southern plains in the next two weeks. Overall trade viewed this as favorable for the hard red winter wheat harvest time frame.
The Canadian drought monitor was updated for May 31 showing an expansion in drought across the western prairie region of Canada. The area between Saskatoon and Regina, Saskatchewan, has expanded from D2 severe drought to D3 extreme drought. Areas in Alberta have expanded from DO abnormally dry to D2 severe drought. All of Manitoba is currently showing abnormally dry with western portions rated D1 to D2. Much of this region has experienced less than 60% of normal precipitation in the past six months. This update sent wheat contracts sharply higher in June 6 trade.
SovEcon lowered its Russian wheat crop estimate to 82.6 million metric tons versus 83.4 million metric tons previously citing dry conditions in the month of May. Germany's farm cooperative association DRV pegs wheat harvest at 24.7 million metric tons, up 21.9% from last year.
The U.S. dollar trended lower for the week to the $97 area. This area currently serves as support, and if the dollar retreats below this level, it would be favorable for the wheat complex.
Current support for July Minneapolis is $5.46 with $5.68 followed by the March 22 high of $5.76 as resistance. The Minneapolis market was at the high or low end of this range each day this week which made for very choppy trade.
For the week ending June 6, July contracts for Minneapolis wheat were up 13 cents at $5.65, up 7 cents at $5.10 for Chicago wheat, and down 17.75 cents at $4.5525 for Kansas City wheat.
The corn markets retreated from five-year highs this week, as they failed to break $4.54 December resistance set in July 2015. Weekly crop progress reports show farmers are only 67% planted compared to 96% for the five-year average. The trade was expecting 68% to 70%. U.S. farmers only put in 9% of the crop last week and corn plantings are the slowest pace on record.
To put it into perspective, 30.6 million acres of corn are left to be planted compared to U.S. Department of Agriculture intentions of 92.4 million acres. Since records were kept, the slowest planting pace as of May 26 before this year was 67% in 1995. The eastern Corn Belt is lagging the worst with Illinois 53% behind average, Indiana 63% behind average and Ohio 57% behind average. More rains are forecast for that region in the next week.
Corn emerged is at 46% versus 84% last year and 84% for the five-year average. Crop condition ratings were not released this week as less than 50% of the corn is emerged, but with the exception of Nebraska, one could expect conditions to be much worse than the five-year average.
The lowest rating in the last seven years out of the gate was 63% good to excellent in 2013. With the crop a good two weeks behind normal, there is growing consensus among the trade of lower average U.S. yields in 2019. With the reduced amount of planted acres, there is also growing evidence that the 2019-20 stocks to use ratio will be under 10%.
The corn market reacted negatively in June 5 trade to a Bloomberg article citing that Smithfield Foods, a Chinese owned company, is purchasing Brazilian corn into the U.S. According to other sources, the reason for the purchase was that barge traffic has been limited in the Mississippi Valley region and that rail costs for shipping the corn would have been over $1.50 per bushel.
The other reason for the break June 5 were forecasts showing an easing up of the continued wet pattern that has been around the past two months. Six-to-10-day model runs were showing overall drier and cooler for much of the Corn Belt. Corn rebounded in June 6 trade, and it appears we have a 30 cent trading range that has developed with $4.24 December as support and $4.54 December as heavy resistance.
USDA stated acres that farmers claim as prevented planting will NOT be eligible for Market Facilitation Program payments. There will be $3 billion in the federal disaster program that possibly could be applied to prevented planting acres. Rumors are that those dollars would only be applied to counties that are declared disaster areas or possibly contiguous counties to counties that are declared disaster areas.
Corn inspections totaled 29.3 million bushels for the week ending May 30 below the 45.1 million bushels needed each week to reach USDA's export estimate of 2.3 billion bushels.
Inspections for 2018-19 now total 1.548 billion bushels, down 1% from the previous year. Weekly export sales showed a cancellation of 8,800 metric tons of corn for 2018-19. Export commitments now total 1.899 billion bushels and are down 13% from a year ago.
November soybean futures broke back below $9 and a small planting window has allowed some planters to get back into the field. An open window this week for some parts of the Corn Belt, mainly the northwest part of the Corn Belt, is helping to get a few acres seeded. The forecast really cools down after the June 8 weekend across the Midwest, which may slow the planters down again. Scattered rains continue to cause problems across the Corn Belt, with the eastern half not getting a break from the rains.
The six-to-10-day forecast remains very cool but is taking out some moisture for the eastern half of the Corn Belt. The eight-to-14-day forecast is cool and wet for the entire eastern two-thirds of the U.S. If these forecasts come to fruition, that could be the nail in the coffin for farmers that haven't been able to get their soybeans planted. There is still time ahead of the final planting dates to get the soybean crop in, but every day we get further into June will most likely have a strain on yield.
Soybeans planted for the week ending June 2 was 39% complete versus 86% last year and 79% for the five-year average. This planting pace is the slowest on record as it beat the 1995 year for the slow pace record at that was 40% followed by 45% complete in 1983, 1990 and 1996. There were 56 million more acres of soybeans left to be planted in the U.S. as of June 2. The "I states" and South Dakota can't keep the rains away and were 38% to 63% behind their normal planting place as we head into June.
Soybeans emerged came in at 19% versus 65% last year and 56% for the five-year average. This is by far the slowest emergence pace since records started being kept in 1999. Emergence pace of 31% in 2013 was the old record.
The final planting date for soybeans in Minnesota, Nebraska, the Dakotas, and the northern two-thirds of Wisconsin is June 10. Iowa, Michigan, the southern third of Wisconsin, and the northern third of Illinois and Kansas has a final planting date of June 15. Indiana, Ohio and the majority of Illinois and Missouri has a final planting date of June 20.
President Donald Trump has signed the $19.1 billion disaster bill. This bill includes $3 billion in agricultural aid, but it is not entirely clear how the aid will be divided up. According to an article in Successful Farming, "the disaster bill says agricultural aid can include payments to growers who were unable to plant crops or who lost grain stored on their farms to flooding. The bill directs the USDA to parcel out the money in grants to states, which would have broad discretion in fashioning aid programs for their individual needs."
The 50-day moving average of $8.93 is new support after November soybeans couldn't break the 100-day moving average of $9.205. The contract low of $8.155 set on May 13 is support. The front month contract July low of $7.91 set on May 13 is the lowest futures price since $7.76 that was set in December 2008. This is now major support.
Major resistance is looking like $9.3125 on the weekly charts. On the daily charts, resistance is $9.34 and then the 10-month high of $9.71 for new crop soybeans that was set on Dec. 12. November soybeans are down 15 cents for the week ending June 6.
For the week ending June 6, July canola futures were down $5.50 at $454.70 Canadian per metric ton. The July Canadian dollar was up .00032 at 0.7483. This brings the U.S. price to $15.43 per hundredweight.
• Velva, N.D., $15.14 per hundredweight, August at $14.65.
• Enderlin, N.D., $15.15 per hundredweight, September at $15.33.
• Hallock, Minn., $15.12 per hundredweight, July at $14.95.
• Fargo, N.D., no bid, July at $15.05.
Cash feed barley bids in Minneapolis were at $3.25, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem, N.D., bid is $3.
Cash bids for milling quality durum are $4.75 in Berthold and at $4.70 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.80. July bids were at $17.55.
For the week ending June 6, soybean oil was down 4 cents at $27.76 on the July contract.