Update for April 26th, 2019
Right now there is nothing positive in the technical or fundamental picture and traditionally when this occurs, markets reach new lows. In a recent interview, Jerry Gulke pointed out that as of Monday, April 22nd, December new crop corn is now below prices we saw last July. “You can determine if the state of affairs now are worse than those known back in mid-July and subsequent events and prices over nearly nine months of trade. Considering the hype in corn being the market that showed the most promise for demand, this has to be a major blow to those that have been hoping for that $0.40 rally that would hopefully result from making things nice again with China. If the majority of 2018 and 2019 corn hasn’t been or isn’t protected from price erosion, the “hope” is likely turning to fear as planters hit the field.” Regarding the first chart below Gulke warns producers to be aware of what this recent low in corn prices could mean. “The key is to be on the right side of the trend, and one look at the charts says that if there isn’t a miracle that curbs U.S. production, the support just penetrated will likely now become overhead resistance over time, perhaps beginning with the May USDA report that reflects the supply and demand situation for the 2019/20 marketing year.”
Interestingly, the picture for soybeans is similar to corn but soybean prices have not reached levels that we saw in July 2018 which is surprising given the 900 million to 1.1 billion bushels of stocks come September 1st, 2019.
Gulke went on to discuss the current situation, “I think there has been a period of unbelief of what happened and the fact we’ve not seen a billion bushels of soybeans available at the onset of another harvest, and most don’t know how to handle that situation and won’t voice a price level that it will take to clear the market of excess…Suffice it to say that in marketing when there becomes too much of something, it goes on sale.” He believes that the U.S. needs to build demand over the next 3 to 7 years which would help eliminate the excess supplies, “and we’ll look back at this event in our lives as another hiccup”. Gulke encourages producers to develop a plan because “A do-nothing situation is still a plan to do nothing and then it becomes a matter of reacting to a situation, which the government is good at. So, if you are thinking Trump will come through with a tariff payment again, you may be half right as he may not have much choice but to react to get farm states to vote. There is always weather, and that is always the case, whether it is in the U.S., South America, Russia, Ukraine or perhaps China. If you find yourself in a place where hope is turning to fear, you are probably not alone.”
The USDA has decided that they will not be surveying producers regarding the amount of grain that was lost or destroyed due to the extensive flooding caused by the bomb cyclone this spring. They plan to report losses from on-farm storage in the June stocks reports. Indigo Ag, an agriculture technology company has estimated the floods have destroyed 5 to 10 million bushels of stored crops across the states of Nebraska, Iowa and Missouri. Those lost bushels of corn and soybeans have been valued between $17.3 million to $34.6 million.
Crop Progress updates from the USDA this week indicate that corn planting across the U.S. is up 3% from a week ago to 6%. This is 6% below the 5 year average and 1% lower than what the trade had anticipated. 1% of the nation’s soybean crop has now been planted, this is 1% lower than the 5 year average and the average trade guess.
The map below was shared with me, it was developed on April 24th from data gathered from a poll of producers across the country. This represents corn planting progress on the 5.37 million corn acres those producers manage.
Sorry to say but winter is not finished with us yet. Snow is expected across several Midwest and Plains states this weekend with a winter storm watch now posted for many with 3-6 inches of wet snow likely in the heaviest band. The exact location is still fluctuating as the track of the low could shift the heaviest snow band further north of south as it approaches the region early Saturday.
Unfortunately the outlook does not improve into next week as heavy rainfall is expected with as much as 5 inches predicted in the southern Plains, Missouri and portions of southern Illinois and Indiana.
The long-range GFS model shown in the map below, calls for 2 to 4 times the normal amount of rainfall across the Heartland between now and May 11th.
NOAA has published their extended summer outlook for May-June-July. As you can see in the map shown below, much of the middle of the country is expected to find temps near normal with rising temps as you move further from the center and rainfall is projected to be above normal for the majority of the major crop production regions.