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Update for April 29th, 2022

Funds continue to maintain a heavily net long position in both corn and soybeans. We need to consider what degree of downward risk this could place on the market if they decide for whatever reason to unload some of their long positions. There is a long season of weather and production concerns yet for the U.S. and SAM, as well as impacts from the from the war in Ukraine that have not even been anticipated or allotted for yet. Over the last 52 weeks the price for DEC-22 new crop corn has increased by 47% and last week’s rally nearly broke through the all-time high for corn that was set in 2012. Several elements are helping to support the recent price rally. 1. Dry weather in the world’s 2nd largest corn exporting country of Brazil is worsening and is getting larger in scope, it is considered by many to be the biggest short-term price driver. Conditions have turned unfavorable during an important stage in the Safrinha growing season and forecasts do not show any relief in sight. 75% of Brazil’s corn crop is grown during the second growing season so complications that arise during this time-frame are particularly concerning. Up to this point the USDA and many analysts were expecting a record setting corn crop despite the drought issues that reduced yields from the 1st season crop but we may begin to see those estimates fall in the coming weeks. 2. Export sales have been strong, just within the last few days orders for 1.347 MMT of corn to China and 281,000 MT to Mexico were announced. 3. We are now in the final week of April and very little field-work has occurred in the Northern Plains and Central Corn Belt, going forward the trade will be paying close attention to forecasts.(Many forecast maps included in the weather section at the end of the letter) During the historic planting delays of 2019, the market showed little price reaction until mid-May. But this year is different because stocks are much tighter and the global unrest is elevating fears we may see even smaller supplies going forward. So far corn planting in the U.S. has been slow, the 2nd slowest since 2010. Last week the USDA estimated that 4% of the corn crop had been planted, this week 7%. Compare this to April 25, 2021 when corn was 17% planted and 2020 when 24% had been sowed. The cold and wet weather has virtually stalled spring field work across key areas of the U.S. Corn Belt: · Iowa 2% planted vs the average of 15% · Illinois 2% vs average of 21% · Indiana 1% vs 10% average · Nebraska 10% vs 11% · Minnesota 0% planted vs 10% average · Ohio 0% vs average of 5% · Missouri 10% planted vs 29% average

U.S. soybean planting is also running behind the pace from the past 2 years. A week ago, the USDA estimated 1% of the nation’s soybean crop had been planted, this week 3% compared to 8% in 2021 and 7% in 2020. Lockdowns persist in Shanghai, Beijing and several other cities in China as Covid cases and testing increase. The longer this continues the longer demand for U.S. soybeans from the communist nation remains uncertain. Cold, wet weather is delaying the start of the spring corn planting season. If the conditions remain unfavorable more planned corn acres may need to be switched to soybeans.

Russian attacks in the Black Sea region of Ukraine have escalated over the past week. This has ended the ability to ship grain exports out of the country and has put the focus and pressure on railway systems that are now the exclusive path for grain exports out of Ukraine. Late last week officials announced that the state-owned railway company had placed some temporary restrictions on the movement of certain ag products across the border into Poland. APK-Inform consultancy told Reuters that this temporary hold through Izov, Poland has been extended until May 3rd. Roman Rusakov, the Deputy Agriculture Minister stated that the restrictions are in place due to a lack of Polish inspectors. The Ukrainian Agriculture Minister stated earlier this month that the main task assigned to the department at this time was to find alternate ways to export the more than 13 MMT of grain that is still available for exports which is becoming more complicated and dangerous by the day.

Some high production areas of the U.S. that just a few short weeks ago were too dry are now too wet as a result of a persistent of La Niña and a blocking high pressure. The bullseye has been centered over North Dakota. The state received one to 2+ feet of snow April 12-14th and the area received more frozen precipitation this past weekend as well. This is only magnified by the record-setting cold temps that have accompanied the snowfall. Bismarck, ND recorded its latest-ever reading of -0 degrees and is now the coldest April since 1996 with lows falling to minus -1F on April 5th.

The La Niña weather pattern that has been actively influencing temps and precipitation for several months is forecast to remain through the U.S. growing season. During winter months a La Niña pattern typically sends storm tracks over the northern U.S. In spring the warming trend moves the jet stream further to the north but that northward re-orientation isn’t happening it is blocked by the far Northern Hemisphere high pressure. Nathan Hamblin, DTN long-range forecaster says, “I think what you are seeing is an early trip north of the jet stream during the spring months and it suddenly gets halted because of the presence of high latitude blocking”. Unfortunately, the newest 30-day forecast does not show an improvement in the overall temperature pattern. The northern and central U.S. are expected to see more below-normal temps throughout the month of May.

Weather outlooks can and often do change daily. So how accurate are these forecasts as we anxiously wait to begin the planting season. Eric Snodgrass, principal atmospheric scientist at Nutrien Ag Solutions explained to Farming the Countryside that the longer out the forecast is, the less reliable the data is. Remarkably though the 3-to-9-month range is much better “What’s interesting is we actually have better prediction in that long-term range because we’re looking month-by-month at the chances of being above or below average, with respect to some variable precipitation or temperature.” He reports the accuracy as: • 5-day = 92% accurate • 7-day = 82% accurate • 10-day = 55% accurate We have heard for months now that we are locked in a La Niña weather pattern. This particular pattern tends to reduce the jet-streams ability to move as it should over the Midwest which can mean too much rain or too little. Snodgrass explained “In 2019, we were coming out of an El Niño and it was wet everywhere. This year, we’ve gone into drought in the western half of the country and the eastern half has been soaked.” Meteorologist Matt Yarosewick told Ag Day that he sees a shift starting in the La Niña weather pattern. “A lot of moisture in parts of the Great Lakes and interior parts of the mid-Atlantic states and Northeast will stay cooler up north with more precipitation, while back in the Northwest, where the La Niña jet stream dips, they’re much warmer and drier. This pattern is starting to weaken, which could be a sign of change.” Last week BAMWX’s long-range meteorologist Bret Walts told AgriTalk that he expects more “unseasonably” cold temps in the next few weeks with a frost and freeze still possible into the first week of May. He looks for the summer temps to be normal to above normal in the Corn Belt, states across the South, Gulf Coast and mid-Atlantic will likely see temp well-above normal.

Many of these cold days can be blamed on water temps in Lake Michigan. 40 to 50-degree days on the northside of the red boundary line in the map above are likely the result of the easterly winds moving across cold water in Lake Michigan which is not much more than 40 degrees right now. Depending on the exact easterly direction the wind is blowing this boundary line moves accordingly and can vary temps from the upper 40’s to over 70 degrees over a short distance. Unfortunately, the outlooks for the first 2 weeks of May continue to indicate an easterly wind-flow.

The forecast for this weekend includes a couple periods of rainfall but also some warmer temps. This looks much better than it did a few days ago. The map below shows the EURO temperature estimates for the first part of Sunday, then a new system is expected to move into the Midwest bringing cold air and a lot more precipitation.

Rainfall totals will vary considerably depending on where thunderstorms develop. These areas could see locally heavy rainfall Friday night into Saturday. Doppler estimates for total weekend precipitation are shown in the first map below.

As we welcome in the month of May hopes have been that we would also get a change in weather….well that’s not what the outlooks show. Rainfall chances are highest for Monday night into Tuesday and again Wednesday night into Thursday. Over the next 2 weeks the EURO weather model shows precipitation totals way above normal for the entire central U.S. Some weather models even show accumulating snowfall on May 6th in northern Illinois.

Snowfall potential May 6th

Whether any areas actually see any snowfall next week isn’t really the main point, the biggest issue going forward could be the unseasonably cold temps. We could easily see afternoon highs next week in the 30’s to low 40’s.

When you couple the cold temps and the abundance of precipitation soil temps for May 13th are currently projected to be in that upper 30’s to low 40’s degree range. Cold and wet soil = no planting progress and no germination of what had already been planted.

The EURO weekly released just today shows this for the overall average temperature for the month of May.

The EURO also has also released the June outlook. This map below shows the 7-day departure from normal temps for June 2nd – 9th. Many forecasters expect that once they arrive we will see more of these warmer than normal temps for the remainder of the summer.

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