Grains rally despite good US crops
Wheat and soybeans had a nice rally the past week.
New high prices were set in Chicago wheat and soybeans, as more weather worries seem to be gripping the US markets - although not necessarily based on adverse US weather news. The major weather problem is not centered in the US, where most crops have above average yield potential right now rather than below average. Pro Ag yield estimates are above trend on virtually every crop based on early planting/emergence and the plentiful soil moisture in most Corn Belt areas. Small regional pockets of dryness have developed, but for the most part other than the southeast, there hasn't been much crop stress other than in the southeast US. In fact, the western Corn Belt has more worries about excess moisture than moisture shortages.
If we can hold these conditions for a while, it could end up to be quite a big yield year. But with most of the season ahead of us, this crop could both improve to a bumper yield, or decline significantly to a disaster as there is still plenty of growing season left to do both. The best odds on favorite for now though is a slightly above average crop, as Pro Ag yield estimates are currently 156-157 bu/acre for corn and 42 bu+ soybeans. Winter wheat yield estimates are also near 48 bu/acre, so Informa's estimate this week of a 1.8 bu/acre hike from last month's 43.5 bu USDA estimate may only get us halfway to the final yield number. We have heard some grumbling, though, about poor yields (20 bu) on ground that looked pretty good (60 bu straw) - blamed on the Easter freeze damage.
It looks like a fairly non-threatening weather forecast, for most of the Corn Belt from today forward, with only Southeastern ND at risk of some prevent plant corn/soybeans due to wet conditions in Richland, Ransom, Sargent, Dickey, and LaMoure counties with perhaps the biggest problem in Richland County. Most of the rest of the US looks like they'll get favorable weather to complete most of the crop planting of all crops. And most of that crop is saturated in soils right now, so drought might be the least of the worries for the typical central/western Corn Belt farmer.
Export sales and shipments haven't exactly set the world on fire, but fund buyers seem happy to take on long grain positions. The key question is, should we let them (or should we sell). Pro Ag is tempted to add to soybean sales at this juncture, as we've purposefully held off on selling additional soybean until the corn/bean ratio nears 2.3. So far that has been golden advice, as soybeans have gained significantly over the price of corn the last few weeks. Could there be a hint of further acreage shifting from soybeans to corn due to early planting. As seamlessly as soybeans have risen in price to date, it certainly appears to be the case.
In the rest of the world, most areas are in pretty good shape including western Europe (France, Germany, Poland). Problem areas are eastern Europe (Ukraine and Russian) which are suffering through a warm/dry spell there. Perhaps the biggest problems are in China, where the north is burning up under heat and little rainfall.