Market Eyes Propspects of Late-Maturing Crops, Analyst Says
Grains had a roller-coaster day Monday, as China trade rumors/deals dominated the trade, first starting higher in all grains, and then closing with strong 25¢ gains in soybeans, but 10¢ to 12¢ losses in wheat.
How can easing trade tensions with China be bearish wheat? Somehow wheat was sold hard after the open yesterday by someone who thought they knew something! Today, wheat has almost completely reversed yesterday’s losses, so who knows what was driving it yesterday.
Soybeans up 25¢ on easing trade tensions is easily justified, because we lost 50¢ or more when tensions began.
So, maybe there are even more gains to come?
Corn is at recent highs and perhaps the most bullish grain.
Weather is becoming more bullish, too, as recent rains were disappointing in coverage and amounts. Forecasts have turned much warmer and drier, which sounds like a drought-type forecast in May. Now that planting is equal to normal and delays are no longer much concern, drought is the biggest threat to this crop (especially a late-maturing winter wheat crop).
The next two weeks’ forecast calls for winter wheat to suffer from warm/dry conditions that are likely to trim the crop, perhaps significantly, if they persist into harvest.
The next seven days are forecast to be wet in the southeast U.S., including Tennessee, Kentucky, and Pennsylvania. But most of the rest of the Corn Belt will see below-normal precipitation the next seven days, with above to much-above normal temps.
The eight- to 14-day forecast is also warm/dry for most of the Corn Belt, the driest in the northern U.S. and western Corn Belt, HRS wheat, and winter wheat country. The southeast will remain above normal for precipitation.
This warm/dry forecast is concerning developing this early in May; if this persists, it could be devastating to a normal to late planted/maturing crop.
Crop progress this week showed corn at 81% planted, equal to normal as we’ve had rapid planting progress in May. Emergence is 50%, 3% ahead of normal.
Soybeans are 56% planted, 12% ahead of normal with 26% emerged, 11% ahead of normal.
Cotton is 52% planted, now 7% ahead of normal while sorghum is 39% planted, 1% ahead of normal. It’s astounding, but with the wide open window for planting in many areas in May, virtually the entire crop was planted in many areas in about two to three weeks! Of course, the relatively dry and warm weather has allowed planting to go virtually nonstop in many areas from when farmers got in the field until they planted the last seed.
Minor crops are also ahead of normal planting progress now, with sugar beets 95% planted vs. 89% normal (6% ahead), sunflowers 12% planted (equal to normal), and HRS wheat 79% planted (only 1% behind normal). HRS wheat is only 37% emerged, 15% behind normal so it has some catching up to do.
Barley is 81% planted, 3% behind normal with 45% emerged (13% behind normal). Oat planting is 86% planted, 5% behind normal with emergence 67%, 10% behind normal.
The small grains have caught up to near-normal planting progress, but the crop is going to develop late as most of the planting was done the past two weeks. That leaves small grain susceptible to late-summer heat in July and August (and drought), and means the probability of crop losses are heightened due to the late development.
So we have a crop that is now planted about on schedule, but emergence is behind normal as the start was so late (especially in HRS and Canadian crops). This crop will be developing later in the summer than normal, so if heat becomes a problem this summer, the crop will be exposed to it during its development.
President Trump was hot and heavy with the tweets yesterday morning, with many on U.S. agriculture and its potential to sell more product to China with an agreement on trade. In fact, there are too many to quote here, but I’d suggest reading them yourselves to get the inside scoop on his take on the negotiations and direction they are going. For the most part, both U.S. officials and Chinese officials are talking nice.
Probably the most bullish for agriculture is that when negotiations came to what the Chinese would like to buy more of from the U.S., ag and energy products came up. With a huge $375 to $500 billion trade deficit to China, that is huge news for soybean growers as well as wheat, corn, and other ag commodities. Doing the math, 2 billion bushels of soybeans are only worth about $20 billion; for corn, 1 billion bushels is worth only $4 billion. So it would take a lot of corn, soybeans, or wheat to reduce the trade deficit with China any measureable amount.
What could be a better combination for a bull market in grains this summer?
Late planting/developing crops with a hot/dry forecast beginning in late May, and China lurking to negotiate to buy a significant amount of grain, perhaps not just soybeans but sorghum, wheat, and corn as well? Stay tuned, but strap yourself in this summer, it could be the funnest roller-coaster ride grain farmers have had in a while.
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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