Wheat Trade Eyes Eventual Bullish Market
For the first week in over a year, winter wheat yield models from Progressive Ag declined significantly this past week as dry, warm weather impacted most of the western part of the U.S. The wheat yield potential is still above average, but it is the direction of the crop that is concerning. Could it be that wheat prices may finally have seen a bottom? At the same time, planting of the corn and soybean crop advanced significantly in the western Corn Belt under the same warm/dry weather. We now are at normal planting progress of both crops, and with good soil moisture levels, we may have a good start to the row crops in 2017.
It’s raining in the western Corn Belt today (5/16) and spreading eastward, including the states of ND, SD, MN, WI, NE, and MI. The weather forecast for the next seven days brings back above-normal precipitation for the western Corn Belt, and normal to above normal in the eastern Corn Belt. Temperatures will be below normal in the western Corn Belt, and normal to above normal in the eastern Corn Belt and Eastern seaboard. The eight- to 14-day is for normal to above-normal precipitation in the eastern Corn Belt, and normal to below normal for the western Corn Belt. Temperatures will be mostly below normal for all of the Corn Belt in the eight- to 14-day forecast.
Crop progress reports out yesterday, 5/15, showed great planting progress in the western Corn Belt, but slow progress in the East. Corn planting is now at 71% planted, 1% ahead of normal. For the first time this year, we have moved ahead of the normal progress! States that planted the most last week include MN (49%), SD (45%), ND (35%), WI (33%), and IA (33%). States that planted the least include IN (5%), NC (5%), OH (3%), TX (3), PA (9%), and IL (10%). Eastern Corn Belt states are now lagging in planting progress, with OH (only 49% planted), IN (56% planted), and PA (35% planted). Corn emergence is 31%, behind the normal pace of 36%. Soybeans are 36% planted, equal to the average as the western Corn Belt had a good week of planting. Soybean emergence is 8%, 1% behind the average pace.
HRS wheat planting advanced to 78% complete, now 5% ahead of the average pace of 73% planted. We planted 24% of the crop last week, a great week for HRS wheat planting. 40% of HRS wheat is emerged, 4% behind the average pace. Barley is 78% planted, still 1% behind average in spite of planting 25% of the crop last week. Barley emergence is 42%, 8% behind the average pace of 50%.
Cotton planting is 33% done, 4% behind the average pace of 37%. Sorghum is 32% planted, 3% behind the average pace of 35%. Sugar beets have advanced significantly to 96% complete, 15% ahead of the average pace of 81% planted. Oat planting is 91%, ahead 4% from the average pace of 87% complete. Oat emergence is 72%, 1% ahead of average. Oat conditions improved 1% to 62% rated G/E, still well below last year’s 73% rating.
Soil moisture levels are still high, with 86% of topsoil rated adequate/surplus. That is down 5% from last week due to the very dry week, and equal to the previous year now. Subsoil moisture levels are 87% adequate/surplus, down 2% from last week but still 1% above last year. We still have good soil moisture levels in many areas, it just was depleted a bit last week due to the dry weather that opened up a planting window for spring-seeded crops.
On the bullish side, winter wheat crop ratings dropped 2% this week to 51% rated G/E, now well below last year’s 62% rating. This also resulted in the first significant drop in winter wheat yield models, down 0.29 bushels per acre and the most significant drop in over a year! The yield model is at 49.5 bushels per acre, still above the most recent USDA estimate of 48.8 bushels per acre, but the important thing is it is now dropping significantly and no longer rising. If that continues, we may have an emerging bull market in wheat eventually. Right now, wheat continues to march lower as if it wants to retest the recent lows. If so AND the yield model continues to drop in subsequent weeks, that will be a buying opportunity for specs to go long wheat. Stay tuned: 2017 doesn’t have to be at all like 2016 in crop production, yields, or prices! Now we just need to generate some positive news in the soybean and corn market as well.
Livestock markets have had a wild ride the past few weeks, and it does appear a market top may have been formed in both fat cattle and feeder cattle. Technicals are more convincing in the feeder cattle, with a weekly downside reversal formed on weekly charts. But it was a heck of a ride higher there for a while, with over a week of limit up moves in the cattle market. But it appears all good things come to an end.
Ray Grabanski is president of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings.
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