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Rapid planting, improving winter wheat crop
Rapid planting progress of corn, soybeans, and HRS wheat is likely the coming two weeks with dry and warming weather forecast ahead. Since the weekend was open weather with little national precip, it's likely that up to 40% of the nation's corn crop and 20% of the nation's soybean crop will be planted the coming week, pushing us closer to averages and coming just in time to rescue this year's crop with little potential yield damage and acreage shifts. Combined with improving winter wheat crops (for the first week of the year), that could spell trouble for grain prices in the near-term, making Pro Ag more clearly in the bearish side for grains again.
The warmer/drier forecast will allow rapid planting progress across the U.S. - just in time as planting progress has fallen further behind normal in weekly reports. Yesterday, May 13, USDA reported weekly crop progress that showed corn only at 28% planted vs. 65% normally. Only 16% of the crop was planted last week, slightly below the norm for this week.
However, the planters are all going this week as virtually no rain had fallen over the weekend in the U.S. It's likely that 10% of the corn crop is being planted per day on many farms, and the crop progress next week should show rapid planting progress of corn. It's likely we will be 60% planted or more by next week, and if the forecast holds, 85% planted or more by the last Monday of May. That will minimize the damage from late planting and likely mean that most of the corn will get planted. Due to the rapid improvement in planting conditions over the past week, Pro Ag feels we need to reduce our switched acres of corn to soybeans from 2 million acres down to only 1 million. Already, USDA has reduced expected yields over 5 bushels per acre - enough to take into consideration late planting to date. It's time to start selling corn again, along with most other grains.
Other weekly crop progress showed soybean planting at 6% vs. 24% normally, but with planters now able to go on soybeans as well as corn, many producers are planting them side by side. It's likely that planting progress will expand rapidly in the coming two weeks, with many corn farmers finishing up this week, and turning their attention to soybeans next. It's likely that with excellent planting weather forecasts the coming two weeks, virtually all of the soybean acreage will get planted timely, and we may even lose 1 million acres of the expected "corn to soybean acreage" as noted above. With ideal weather the next two weeks, it's probable the crop will be 50% planted by the end of May - enough to pressure both corn and soybean prices in the coming weeks.
Other numbers showed cotton planting at 23% vs. 38% normally, sorghum at 29% vs. 36% normally, sugar beets 62% planted vs. 78% normally (and 38% planted last week!). Oats are 70% planted vs. 85% normally, with HRS wheat 43% planted vs. 63% normally. Barley is 55% planted vs. 63% normally. With planters running hard this week, we will catch up to closer to 'normal' planting progress by next week.
Our winter wheat yield model expanded surprisingly the past week -- 0.16 bushels an acre to 45.03 bushels vs. 45.4 by USDA on steady G/E conditions. That means the rapid decline in winter wheat yield potential has ended, and now the crop is actually improving (although HRW is not likely part of that improvement). Given the reversal in fortunes for winter wheat and the rapid planting progress expected the coming two weeks, it's probably time to liquidate the KC wheat long positions, taking small profits.
Specs and hedgers can now sell corn, soybeans, and CBOT wheat again, putting on hedges for 2013, 2014, 2015, or 2016 crops. Downside price targets remain $4.50 December corn, $10 November soybeans, and $6 Chicago July wheat.
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