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3 Big Things Today, May 23

Wheat Futures Lower Overnight; Projected Rise in Revenue Should Give Optimism.

1. Wheat Futures Lower as Rain May Boost Winter Crop

Wheat futures were lower in overnight trading as rain is falling in parts of the Southern Plains.

A storm is moving across parts of southwestern Kansas and the Oklahoma and Texas panhandles this morning, according to National Weather Service maps. Some of the storms appear to be severe.

More thunderstorms are expected to form today and tonight, and precipitation is expected again Sunday through Tuesday with hail being the primary threat, the NWS said.

The rain is very timely as hard red winter varieties that are in critical growth stages in the Southern Plains are in desperate need of a drink of water. The rain, depending on how widespread it is, will likely boost at least some plants in the region.

Wheat for July delivery fell 2½¢ to $5.19 a bushel overnight on the Chicago Board of Trade, while Kansas City futures lost 2¾¢ to $5.37¾ a bushel.

Soybean futures for July delivery rose 1½¢ to $10.32 a bushel overnight. Soy meal futures lost 60¢ to $376.90 a short ton, and soy oil added 0.04¢ to 31.55¢ a pound.

Corn futures fell ½¢ to $4.04¼ a bushel overnight.

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2. Projected Revenue Increase From Recent Years Give Growers Optimism                                     

Corn prices are forecast by the USDA at $3.80 a bushel in 2018, and while that’s below current levels, it would actually end up being well above the average for the past five years, according to analysis from the University of Illinois.

Marketing-year average corn prices were $3.70 in 2014, $3.61 in 2015, $3.36 in 2016, and are projected at $3.40 for 2017. That means the $3.80 price average would be “relatively optimistic” vs. recent averages, said Gary Schnitkey, an economist with the Department of Agricultural and Consumer Economics at the University of Illinois.

Still, go back 10 years and the average price is $4.42 a bushel, he noted.

If the corn crop were average – say 174 bushels an acre, based on trend yield from the past 30 years – and prices averaged $3.80 a bushel, that’d put revenue in 2018 at $661 an acre, a 10% increase from the prior year, Schnitkey said, though that’s still below the 10-year average.

But from 2014 to 2017, all U.S. corn yields were above trend, while they were below trend from 2010 to 2013. How this year shakes out, of course, remains to be seen.

“There is a strong, negative correlation between actual-trend yield changes and price changes,” he said. “It is likely that a below-trend yield in 2018 would result in a price above the $3.80 midpoint projection and vice versa.”

The average price for soybeans, meanwhile, is pegged at $10 a bushel. That’s below the average for the prior 10 years but well above $8.95 in 2015, $9.47 in 2016, and a projected $9.35 in 2017, the report said.

Factor in the estimated yield of 48.5 bushels an acre – the average over the past 10 years but below normal in the most recent years, which have been “exceptional” – and the estimated price of $10 a bushel, and revenue is pegged at $485 an acre, Schnitkey said.

That’s up $26 an acre from 2017 and $6 higher than the 2007 to 2017 average of $479 an acre, he said.

“For corn and soybeans, midpoints of WASDE price ranges for 2018-2019 are higher than (marketing-year average) prices in recent marketing years,” he said. “Using midpoint prices in combination with trend yields result in 2018 crop revenues that are above 2017 crop revenues, presenting some optimism for 2018 incomes.

“Still, 2018 revenues are projected below 2007 to 2017 averages. Moreover, commodity title payments likely will be lower for 2018 compared with recent years, offsetting a portion of the potentially higher crop revenues.”

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3. Thunderstorms Forecast For Parts of Iowa, Illinois, Nebraska Remainder of Week

Thunderstorms are again possible in parts of the Midwest today, as rainfall is forecast north of Interstate 80 in Iowa, the National Weather Service said in a report early Wednesday morning.

While rain is expected, severe weather isn’t, according to the NWS. There’s a chance of storms every day for at least the next week, though the threat of organized severe storms appears low, the agency said.

Temperatures will be in the 80s and 90s in Iowa and Illinois today.

Farther west, scattered thunderstorms will linger in parts of South Dakota and northern Nebraska this afternoon. Rainfall will be locally heavy with possible flash floods occurring, the NWS said.

Additional storms are possible through tomorrow that may become severe. Large hail and damaging wind are the primary threats.

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