USDA action, favorable weather bearish
USDA, in a surprise announcement, opened up 24 million acres of CRP land for haying/grazing yesterday afternoon. That should provide additional feed supplies for cattle producers, and thus easing the feed grain supply tightness somewhat.
The idea by USDA was to allow a one-time haying/grazing harvest after July/Aug to provide more feedstuffs for livestock producers. However, this won't be high quality hay, as clearly it will be cut about 1-2 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 2x 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/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 nations food and feed supplies, and obviously should be as it is a great resource important to our country. This pressured corn/wheat overnight to double digit 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?
Also yesterday afternoon the crop progress report showed corn planting at 88% complete, an advance of 15% from last week (vs. 6% normal) so we are 'catching up' to normal progress. Soybean growers planted 25% of their crop last week (vs. 20% normal), moving to 52% complete vs. 67% normal so we are catching up to normal progress with another good week of planting. The western Corn Belt is virtually on schedule with normal, but the eastern corn belt is still struggling. The worst states are OH and MO where some ground is likely to be switched from corn to soybeans, with ILL, PA, and IND all lagging significantly too. However, topsoil finally is drying out in the east, and the weather forecast looks more like normal weather over the coming 2 weeks so hopefully progress will start to accelerate in the eastern corn belt. The crop is also behind normal, and many acres will need to be replanted due to cool/wet conditions providing a poor stand. However, the disastrous start to the 2008 crop through May 10 has quickly reversed direction the past 2 weeks, with progress moving along much better. The improving planting progress/conditions will provide price pressure to the market over the coming week.
Winter wheat crop conditions also improved 2% G/E last week, raising yield potential further above 'trend' as Pro Ag yield models jumped a huge 0.5 bu/acre, the largest jump this year. That reverses last week's drop and continues to suggest this year's wheat crop is still getting better. If cool weather persists, what looked like bummer might turn out to be a bumper crop! Rain also fell in KS, OK, and TX the past 24 hours that will greatly aid filling wheat heads. The crop is still well behind normal, with only 64% headed vs. 76% normal. KS is 80% headed vs. 97% normal, so there is still a long ways to go for that crop (another 30 days???). OK is 99% headed while TX is 93% headed. Rain now will help fill maturing grain, and Pro Ag expects the crop to keep getting better unless heat reduces yield potential (more 90-100 degree temps are on the way this coming week).