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Corn Market Races Higher on Rainy Spring Weather
Last week, we talked about the possibility of the market going much higher, whether it could break above the five-year high of $4.43 corn, and at the speed of the current rally, how we’d get there quickly.
Well, today in overnight trade we are knocking on that door. The market has rallied $1 in less than three weeks, and the market is screaming 10¢ or more higher each of the past few days. This is the dream that many farmers were praying for all winter, and just a few weeks ago it seemed like it had zero chance of happening.
Grains pushed sharply higher overnight on the planting progress report Monday afternoon, which showed corn planting at only 58% complete, 32% behind the average of 90%.
Soybean planting is actually worse at only 29% complete, 37% behind the average 66% done. So both of these markets rallied significantly as we have already passed the final planting date for corn in northern areas at May 25, and many more areas will hit the final planting date of May 31, in just a few days.
There will be significant prevent plant in corn if producers decide it isn’t worth planting late (producers take a 1% cut in coverage for every day they plant late). The PP payment is now 55% of normal corn coverage, but there aren’t many expenses, either, when the crop is black.
Many producers reason financially that they are better off not planting than paying all the extra expenses, mudding it in, and taking a hit on yield and their APHs next year with a poor crop. If conditions are ideal only one or two days late, that’s when they’ll consider planting. But this year that doesn’t look to be the case for many growers.
For crop already planted, emergence is way behind (11% emerged soybeans or 23% behind normal, and corn 32% emerged 37% behind normal), and the crop looks ragged due to the cold/wet conditions so far.
Cotton is 57% planted (1% behind normal), sorghum 28% planted (16% behind normal), and sugar beets are 94% planted (3% behind normal).
Oats are 85% planted (11% behind normal), sunflowers 9% planted (18% behind normal), barley 87% planted (6% behind normal), and HRS wheat is 84% planted (7% behind normal).
The planting problem is clearly centered in the Corn Belt, where planting progress of corn and soybeans is much further behind normal than any other crops.
Weather forecasts, though, are improving significantly, with warmer and drier weather on the way the next two weeks. But will it be in time to allow significant planting to get done? And how much prevent planting will be included in the corn and soybeans in the end?
Soil moisture levels are still very high, with 92% topsoil (equal to last week) and 92% subsoil (-1% from last week) still rated adequate/surplus in the U.S. That's quite wet to allow much planting in the next week.
It's raining in MO, ILL, IND, TX, SD, NE, and MN today and moving eastward. The next seven days are forecast wet in the central Corn Belt, but drier in the northern third of the U.S. Corn Belt as well as the southeast.
In the 8-14 day forecast today, precip is more normal to even below normal in some areas, with temps now normal/above normal the next seven days in the U.S., and normal/above normal in the 8-14 day as well.
That may allow some decent planting leading up to soybean planting final dates. So, a good deal of soybeans could get planted.
But corn planting might be a different story. We could have 6-8 million acres of corn not planted this year, and instead collect the crop insurance PP payment. If so, that combined with lower yield potential from this late start could tighten corn stocks considerably. The sharply higher corn price, and the Trump money payment (only going to planted acreage) are incentive to keep planting corn late.
We rallied above our July target to price the first of our old crop corn, our first sale at $4.38, basis July, in almost a year! Many simply gave up on the sagging market, but Pro Ag is proud to have had the discipline to recognize sale opportunities below $4 corn futures aren't really opportunities. But this is!
Since we are at $4.38 July (just below the $4.43 5 year high) we are recommending pricing a good portion of remaining old crop corn (anything in the bins from 2018 or 2017 or earlier). We've had over $1 rally in 3 weeks, and perhaps its time to take a few chips off the table?
The market keeps humming higher, though, a sight that pretty much answers many farmers spring prayers this year. Corn is clearly the leader, being a domestic market primarily as we export only a small fraction of corn (about 1/5 to 1/6). Meanwhile, the U.S. exports over half of its wheat crops and nearly half of its soybeans.
Given the trade friction between the U.S. and many trading partners, it's the corn that sees the most life with some weather issues. But even Canada is having trouble with China in trade, rejecting imports of canola and using their typical heavy handed government power.
We are likely to see a great improvement in soybean and wheat fundamentals, too, with delayed/prevented planting of both these crops as well. How much of an improvement will be determined by the amount of prevent plant of each crop. HRS wheat PP is pretty much already set as farmers won't plant much HRS wheat now this late. Instead, it will be prevent plant or planted to a later season crop (soybeans or sunflowers?).
The next two weeks are probably more critical for soybean acreage than any other crop.
Ray can be reached at firstname.lastname@example.org.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.
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