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Late Spring, Declining Winter Wheat

Spring is upon us by the calendar, but winter won't let go of the current weather pattern! The bitterly cold temperatures from last winter are lingering into spring, with temps an unprecedented 4°F. to 16°F. below normal yet in what has been a continuous cold spring that has followed a bitterly cold winter. The combination so far has been deadly to winter wheat conditions and to spring planting, putting the big chill over both to start the year 2014.  

Weather includes rain and snow falling in the eastern U.S. today, with rain in New York, Pennsylvania, Kentucky, and Tennessee, and snow falling in Michigan, Indiana, Ohio, and parts of Kentucky. It's the bitterly cold weather that is causing snow to fall that far south today, just another one of the cold spring days that we've had lately.  Given the terribly cold temps lately, it's no wonder that spring planting is getting underway very slowly. To date, corn planting was only 3% complete Monday vs. 6% average, already starting well behind normal. Cotton is only 8% planted vs. 9% normally, and sorghum is only 20% planted vs. 21% normally, with sugar beets 5% planted vs. 12% last year at this time. Rice is 25% planted vs. 31% normally, and oats only 9% planted vs. 47% normally at this time. We are well behind normal planting, and falling further behind by each chilly day in spring 2014. HRS wheat is 6% planted, ahead only on last year's pathetic 5% pace. Barley is 16% planted vs. last year's slow 17% rating.  

Winter wheat heading is only 5% vs. 4% last year, with the rating a 32% poor/very poor (up 3% from last week) and 34% rated G/E (down 1% from last week). The Pro Ag winter wheat yield model declined a huge 0.29 bu/acre from last week to only 46.26 bu/acre, so we lost 10 mb of production in just one week. The crop is declining rapidly with the deadly combination of little rain and terribly cold weather (and snow). Overall, this crop is well below trend yields now of 47.68 bu/acre. This is bullish and should support wheat prices again. Weather forecasts call for more cold weather the next week, with temps 4°F. to 16°F.  below normal, so the deep freeze continues across the Corn Belt. The eight- to 14-day forecast today warms temps considerably, but we'll see if that forecast is verified in later reports. Rainfall continues spotty for the HRW wheat belt, with little forecast the coming two weeks. The eight- to 14-day shifts rainfall northward into the northern Plains and northern states. (Could that be in the form of snow?)  

Our target for advancing corn sales is $5.40 nearby corn futures, and $7.50 CBOT wheat futures for completing sales of these two crops. We hit the target $15 areas for soybeans Wednesday to price remaining 2013 soybeans.  

For new-crop markets, $5.07 December corn and $12.06 November soybeans were our last targets to be hit for 2014 corn and soybeans, where we advanced sales another 25%. We hold out the last 25% of 2014 crop for the market top to be hit.  

That market top doesn't seem apparent yet, with the weather so awful for spring planting it appears that grain prices are still set to go higher.  But make no mistake, with a trend yield, Pro Ag projects a 1.9 billion-bushel corn carryout in 2014-15, and a 350-mb soybean carryout as well. Wheat carryout will be about steady with current numbers at just under 600 mb. The decline in winter wheat conditions and yield potential is keeping wheat somewhat friendly relative to corn and soybeans. But once the May report is out, the projected carryout for corn and wheat will be released for the first time. Pro Ag does not expect that to be bullish!

So for now, we hold off on additional sales but expect to make new sales in the next month, at which time we will be completing 2014 sales and adding to 2015 and beyond sales. If the planting season would straighten out and allow for average planting progress (at least), then this rally will be over.  

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