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Looking Ahead To Spring Planting
Spring is in the air, with southern areas beginning some tillage operations and northern areas seeing snow slowly disappear as daytime highs push above freezing.
The increased daylight and warmer sun will slowly warm up the earth, and farmers can get back to what they really love - planting and growing crops.
That is always a happy time, and typically with spring comes a spring rally in grain markets. This adds to the happiness of planting a crop. Today, if we continue to rally, we might make a little profit on soybeans. For corn, a rally means that we keep climbing to get a bit more out of the red, and soon we might even make some money in 2018.
Corn has already rallied 30c since Jan. 12 (the bottom), and soybeans over $1 since that time. This will make spring time planting a more happy decision than it would have been on Jan. 12. Winter wheat producers have already planted, but they also will feel better about their decision last fall with the past 2 months rally as well.
The USDA report last Thursday, March 8 had a few surprises, including smaller than expected soybean production numbers for South America (-1 mmt Brazil, -1.1 mmt Argentina). We expected cuts of about 6 mmt in Argentina, and we got 7 mmt to only 47 mmt.
In Brazil, we expected a 2 mmt increase and got only 1 mmt. Net-net, that was friendly soybeans as that was really a huge cut in just 30 days in Argentina. Corn production numbers were cut 0.5 mmt in Brazil and 3 mmt in Argentina, which was slightly more than expected in Argentina (.3 mmt), but more in Brazil (+2.7 mmt). The trade apparently expected a bigger cut in Brazil, due to the slow progress from the cool/wet conditions, but maybe that acreage will need to be cut more later (or yields due to the late planting of second crop corn).
World ending stocks were cut in both corn (-4 mmt to 199.2) and soybeans (-3.7 mmt to 94.4), but rose 2.8 mmt in wheat (to 268.9). US ending stocks were cut 225 mb corn to 2.127 billion, with both soybeans and wheat increased 25 mb each (to 1.034 billion wheat and 555 mb soybeans). It seems odd to cut US exports 25 mb when the world ending stocks were cut along with SAM production.
The market reacted friendly, especially corn, but the smaller soybean production numbers were friendly world news. Now we know why grain prices have been rising lately. USDA continues to hold the fantasy that US winter wheat yields will be at trend for 2018. We would need a dramatic turn around in crop conditions the next few months to achieve trend yields in winter wheat, especially the HRW varieties.
US weather forecasts are improving a bit in HRS wheat areas, with western HRS wheat areas and the PNW seeing above normal precip the next 7 days. However, the Corn Belt and HRW wheat areas will continue to have below normal precip, with HRW areas also seeing above normal temps. In the 8-14 day period, we also have wet weather forecast for HRS wheat areas (especially eastern areas), and also wet weasther for the southeast US. Temps are above normal for the southwest including HRW wheat areas, but temps will be below normal for the eastern Corn Belt.
South American weather today has improved rainfall chances for Argentina, with northern Argentina calling for above normal precip for the entire 14 day period.
Southern Argentina will remain dry, with below normal precip and above normal temps forecast. Brazil will see normal precip forecast for the entire 14 day period, but also below normal temps as they have most of the summer.
Looking at current charts, both the corn and wheat charts still have an uptrend intact after a minor correction in corn and more deep correction in wheat.
Soybeans, however, had a steep loss Friday that puts the uptrend in jeopardy in some charting schools. However, we haven't corrected enough to officially conclude that the uptrend has ended. In fact, support held. So if soybeans can push back through the recent highs, the uptrend would once again be in place. So the next few weeks could be an interesting battle.
Weather is soon to become the focus of the market, with the northern hemisphere set to plant the 2018 crop soon, and that is the majority of the world's production. With weather and planting comes weather risk, and the market will become more in tune with that weather risk as it unfolds in 2018. That usually brings opportunity, and with opportunity usually some decision making needs to be made. Selling at profitable levels is always more fun, and in 2018 it appears that producers will enjoy that opportunity (for some, the first time in a few years!).
Ray Grabanski can be reached at firstname.lastname@example.org.
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years.
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