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Can Even Bullish News Keep The Grain Rally Going, Analyst Asks

Is the extremely late planting now priced into the market?

Grain markets have rallied $1 or more in corn and CBOT wheat the past three weeks, offering the best pricing opportunities in 5 years in corn, and the past year in wheat. 

With weather starting to clear a bit and temps warming, it's possible the market might slow considerably from here (and maybe even go down) the rest of the summer.  June is typically a time which offers a good price for the year, and this year may be no different.  

Weather forecasts have warmed a bit for the next seven days as temps yesterday were about 10 degrees warmer than forecast, which makes one wonder how accurate a 14 day forecast is when the weather guessers can't get today right (not even close!). 

So, the confidence right now in any forecast other than today's weather is slim.  That means that the next seven day forecast which was warmed considerably after yesterday might have more merit than the 8-14 day forecast which is calling for cool/wet weather. 

Temps are above normal forecast in the next seven days, and below normal in the 8-14 day forecast, while precip is forecast above normal south of the IA/MN border, but below normal north of it the next seven days.  
That will allow northern areas to make a final planting push (possibly more soybeans than corn).  The 8-14 day precip forecast today is more normal for the
entire Corn Belt, but these forecasts are always subject to change twice a day, as they are revised that often.  

Planting progress reported Monday was less than expected, with only 67% of corn planted (29% behind) and 46% emerged (38% behind). 

Soybeans are 39% planted (40% behind), and 19% emerged (37% behind).  That's why prices rallied back to their recent highs.  In fact, that's why both corn and soybeans have rallied $1 or more the past three weeks. 

The question is, will the market rally further from here, or is the extremely late planting now priced into the market?  There is a great deal of replanting corn also being done, as the cold/wet weather in May didn't help it at all.  

Winter wheat is 76% headed (8% behind), but the cool/wet weather has been favorable for winter wheat growth with 64% rated G/E (up 3% this week).  Our
winter wheat yield model jumped half a bushel (its largest 2019 gain) to its highest level all year at 52.76 bu/acre, now only bested by the 2016 crop at 55.3 bu/acre.  Winter wheat apparently does not have diseases, yet, as many expected from the wet weather. This was indicated by the 3% rating increase this
week. 

HRS wheat is 93% planted, only 3% behind normal and the ratings came in very high at 83% rated G/E (vs. 70% last year). 

Barley is 94% planted (3% behind) and ratings were also very high at 88% rated G/E (9% higher than last year).  Given these strong ratings, it might be time to price some HRS wheat at current levels, as these ratings for HRS and winter wheat indicate very high yield potential in 2019.  But perhaps that can be expected with cool/wet weather in early spring (wheat likes that weather, unlike corn and soybeans).

Other crops development is not as extremely slow as corn and soybeans. 

Cotton is only 1% behind normal at 71% planted, with conditions 46% rated G/E (4% above last year). 

Sorghum is 35% planted (18% behind) while sugarbeets are 3% behind at 97% planted and sunflowers 19% planted (25% behind). 

Barley is 94% planted (3% behind) and ratings were also very high at 88% rated G/E (9% higher than last year).

While corn has had a nice three week rally on the delayed planting, with rapidly improving weather things can quickly get done, and with higher prices there is incentive to continue to plant corn rather than the much lower priced soybeans.   We have a lot of corn to price yet if the rally continues, but we are getting
concerned that prices can't seem to rally further on fairly bullish news. 

We can't forget that we still don't have back our 25 million acre soybean customer (China), so that even a 10 million acre PP increase this year won't get rid of all our excess production.

We do note that Congress finally passed the disaster assistance program last night through the House, which provides $3 billion disaster assistance to
farmers. 

There is a prevent plant provision in the bill as well that will impact a lot of growers this year, due to the delayed planting year in 2019.  

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Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country. 

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