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Corn Reaches for $5.15, the Next Resistance Level
Corn rallied above the nearly five-year highs late last week, indicating the potential for corn to test the next resistance level at $5.15 per bushel on long-term charts.
The breakout of corn from the previous four-year, relatively low priced range is important, indeed! Now grains have new life breathed into them by the dynamic corn market, and the rest of commodities may also rally as well.
The impetus for the corn rally has been the horrible spring planting conditions that have probably trimmed corn carryout potential a great deal. USDA already said in the June report that we lost 3 million acres of corn that won’t be planted, and another 10 bushels per acre from yield of the late planted corn that did actually get planted. That is just the beginning.
As of yesterday, June 17, 8% of the nation’s corn was still unplanted, or about 7.2 million acres for harvest. To lose 170 bushels per acre on 7 million is nearly 1.2 billion bushels of lost production. Add in a 10-bushel-per-acre loss on the remaining 80 million acres harvested, and that subtracts another 800 mb production.
Essentially, there is now no carryout of corn, and the production season has just begun. What if a dry period hits, or a cold period that prevents maturity, or an early frost? The market will be extremely sensitive to any weather issues.
Weather forecasts today (6/18) remain wet for the Midwest through the next seven days, with about 3 inches of rain forecast for virtually all of Missouri, Illinois, Indiana, Ohio, and Kentucky. That will effectively end the planting period for soybeans, with the rain set to start tomorrow morning and 1 to 1.5 inches the next three days, followed by the rest the next four days. With the final planting date of June 20 in these states, prevent plant will occur for millions of acres of soybeans – something the market has not yet anticipated. (Some still think soybean acres will go up!)
USDA reported 23% of the soybean crop is unplanted on 6/17 (about 20 million acres), and most of it is in Illinois (30% unplanted and 25% behind normal), Indiana (36% unplanted and
30% behind normal), Michigan (47% unplanted and 41% behind normal), Missouri (43% unplanted and 24% behind normal), South Dakota (30% unplanted and 28% behind normal), Ohio (54% unplanted and 48% behind normal), and Wisconsin (23% unplanted and 16% behind normal).
A case like South Dakota is worth studying. Its final planting date for soybeans was June 10, which was last week. The planting progress report shows 27% of the soybean crop was "planted" last week as these numbers went up that much. Did they really, or did actual planting go up 13%, and abandoned acres went up 14%? The question on this survey is how much do you have planted (not in acres but in percentage)?
If you gave up and planted 500 acres and will prevent-plant 500 acres, what is your planting progress, 100% or 50%?
In states, such as South Dakota, where the final corn planting dates were 5/25 and 5/31, 14% of the crop was "planted" last week too. Or did farmers just report, "I'm 100% planted corn, with 500 acres planted and 500 acres prevent-planted." If South Dakota planted 14% more corn last week, it would all be for silage as corn will not mature in South Dakota planted June 10-
South Dakota doesn’t have the capacity to harvest 14% of its corn acreage as silage, so we know 14% of South Dakota corn acreage did not get planted last week! How about their soybeans? And how about all other states in this progress report?
As we said yesterday, planting progress numbers are going to mean less and less as time goes on, because what is the answer when someone asks a farmer what percentage of his intended corn he has planted on July 1, if he has 800 acres planted and he has 200 prevent planted? Is he done planting corn on July 1?
The answer would be yes, I am done planting the 800 acres that I will plant in 2019. Or, it could be I am 80% planted? So, as in HRS wheat, the number in all grains goes to 100% fast, even though the new intention is to plant something else or PP, not plant HRS wheat. My point is that these numbers go up even though nothing gets planted – as farmers give up on planting the crop.
Having said that, this planting report is saying corn planting increased 9% last week. Really? Where can you plant corn from June 10 to June 17 and still get anything but silage?
Nowhere in the northern half of the Corn Belt.
But even if you believe it did, there is still 8% of the corn unplanted, or 7.2 million acres. I submit to you that 7 to 8 million acres of corn are unplanted this year, and 7 to 10 million acres of soybeans will be unplanted. If it is planted after June 25, it won’t matter as the yield will be virtually nothing usable. And corn planted after June 5 in the northern Corn Belt and June 10-15 in the Southern Belt will also be virtually zero yield (except silage).
Crop ratings also were out, with corn steady at 59% rated G/E, and the Pro Ag yield model dropping another 1.5 bushels per acre to 164.5 bushels. We lost another 120 million bushels (mb) last week in production on yield losses, cutting corn carryout further with smaller yield potential. But winter wheat yield prospects improved 0.18 bushels per acre on steady ratings (64% good/exc).
So, we gained 8 mb of wheat, and lost 120 mb of corn.
Since wheat is a feedgrain substitute for corn, that isn’t offsetting the losses in corn production much. That’s why with a feed shortage, corn is the big dog grain, and wheat (normally a food grain) an also-ran in determining price.
Cotton planting is 89% complete (5% behind normal), sorghum 69% planted (12% behind normal), and sunflowers 68% planted (12% behind).
HRS wheat is 2% headed, 10% behind normal, and ratings dropped 4% to 77% rated G/E.
Barley dropped more, with ratings down 8% to 76% rated G/E, and heading percentage also 10% behind normal. When the heat hits in July, barley and wheat won’t like it, and they’ll suffer yield loss, too. It’s hard to get average yields or better when planted late for almost any crop, and that’s the situation in 2019 for virtually everything.
This situation is still bullish, with the full extent of acreage losses still not known (and likely not to be fully known until late summer/fall when FSA data is available).
The acreage report at the end of June will show June 1 conditions, and this year we weren’t even 50% planted with the important crops on that date. So, the market has a lot of price discovery to accomplish, and we’ve got a long way to go to determine how poor yields will be with this late planting.
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. See http://www.progressiveag.com for rankings and link to data
from Top Producer Magazine and Agweb.com.
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