Update for May 3rd, 2019
The crop markets separated themselves this week as corn and wheat moved higher while soybeans posted new contract lows. Last week corn tested recent lows and yesterday was the sixth consecutive higher close for the spot corn contract and values were able to close above price resistance levels. This turn a-round is credited in part to the very low inventory end users are storing as well as the uncooperative weather which is becoming an increasingly important factor. In addition, there are new reports this week that a new trade agreement with China could be signed as soon as next week.
New crop soybean sales are now at the slowest sales pace seen since 2003. The U.S. has less than 30 million bushels of new crop soybeans sold (130 million bushels less than a year ago) with purchases of 17 million bushels designated to China and the unknown category. Last year at this same time these two categories accounted for 143 million bushels of soybean sales.
The states of Kentucky, Kansas, Missouri, North Carolina, Tennessee and Texas in the southern Corn Belt have seen a steady pace of planting progress. Consistently warm temps and drier conditions during early spring aided the start to fieldwork and some of these regions are beginning to see corn emerge. States in the northern Corn Belt have not been as fortunate. According to area agronomists planting conditions vary substantially along the interstate 90 corridor. Cool, wet weather and saturated soils persist from the Dakota’s through Minnesota, Iowa and into Wisconsin. The latest NASS Crop Progress Report shows that planting has not yet started in South Dakota and in the states of Indiana, Michigan, Minnesota, North Dakota, Ohio and Wisconsin less than 5% of the corn crop has been planted. This week’s USDA report shows that 15% of the U.S. corn crop has been planted which is up 9% from a week ago. This is 1% higher than the trade had anticipated but 12% below the 5 year average. Soybean planting currently sits at 3% completed which is a 2% increase over a week ago but is running 3% below the 5 year average. Data from the University of Illinois research reinforces what most farmers already know…the ideal time to plant corn is now, corn planted from May 10th to May 18th typically suffers a 5% yield reduction and after May 20th the yield drag increases to an average yield loss of 9%.
Crop consultant and president of the Soybean and Corn Advisor, Dr. Cordonnier reported that producers in Brazil have sold 52% of their 2018/19 soybean crop. “Last year at this time, the premiums for soybeans at Brazilian ports were $2.00 per bushel over Chicago or more due to the strong demand from China. Those soaring premiums have disappeared this year. In April, the average premium declined 32% from $0.40 over Chicago to $0.27 over Chicago. For July, the premium declined from $0.55 to $0.40 over Chicago. Not much business is being conducted because sellers are asking for premiums of $0.90 over Chicago for April and May and $1.00 for June and July. Most advisory firms in Brazil are recommending to their farmer clients to wait on future sales for something to spur prices higher such as: a weather problem during the U.S. growing season, a devaluation of the Brazilian currency, or higher domestic prices later in the year due to short domestic supplies of soybeans.” With 52% of their 2018/19 soybean crop priced the pace of sales has slowed. “It is no surprise why the selling has slowed-lower prices in Chicago, lower domestic prices in Brazil, and lower premiums at Brazilian ports.”
As I mentioned earlier, U.S./China trade talks are nearing a finish. During an address to 40 world leaders in Beijing, Chinese President Xi was quoted saying “we will establish a binding enforcement system for international agreements.” He also added that they plan to “eliminate improper rules, subsidies, and practices that impede fair competition and distort the market” and will not engage in currency manipulation that harms other counties. In other trade news, U.S. Ag Secretary Sonny Perdue says that an agreement with Japan is close and could be finalized by the time President Trump travels to Japan later this month. The agreement is not comprehensive but instead is focused on the agricultural issues that concern both countries.
Current U.S. weather models are indicating that there is a 65% chance that the El Niño weather pattern that is presently in place will persist throughout the summer. These types of weather patterns are typically associated with cooler and wetter summers for the Midwest. The first map shown below is the latest GFS precipitation accumulation forecast that was published Wednesday evening, May 1st which shows potential rainfall totals through May 17th. If this outlook is accurate it’s quite likely the U.S. could see a huge amount of prevent plant acres all across the Corn Belt in 2019.
The below average temperatures found through much of the central U.S. in April are holding on and are now expected to continue into May according to the Weather Company’s May 2019 temperature outlook shown below. The medium range weather models are indicating that an upper-level pattern has developed which is favorable for chilly conditions to persist across much of the northern tier of the U.S. through at least early May.