For three weeks I have been doing what a market guy is never supposed to do — speculate about finding a bottom for grain prices.
This week we finally saw some daylight, as corn and soybeans found reasons to go higher, although the soybeans really only showed some life for one day.
We ended last week with some good positives, even in wheat markets. Now, if we just had real good reasons for this positivity! Okay, the old crop corn actually went up five days in a row, so that feels like a trend.
July corn futures went up almost 36 cents last week, and that would have felt really good if we hadn’t started down toward $5.50. July soybeans gained 30 cents, but it was mostly May 22. Even July Chicago wheat futures gained 11 cents, to $6.16.
Looking for reasons
There are international and national explanations for these moves, although you will note I did not use the more positive word, “reasons.”
We are still clutching at straws when we explain what is going on, and “explain” is actually an exaggeration. The truth is we are rationalizing and hoping we are right so we can claim to be explaining!
Planting report
This is the planting season, and we have actually been ahead of normal pace in most of the country. Ohio has lagged the normal pace for corn but still has been ahead of the five-year average on soybeans.
The week before last, we actually planted 40% of the corn crop in one week in Ohio, according to the U.S. Department of Agriculture’s report from May 21. We put in 37% of the soybean crop.
That put us ahead of normal for corn, (66% versus the average 52%) and way ahead of normal for soybeans (63% versus 39%). I am guessing that we cannot match that progress in the last week.
The farmers got all those fields planted that just needed to dry a little, but were ready for the planter. Now they may need to get a little tillage done, also.
So, let’s guess we had 85% of the corn and 80% of the soybeans done May 28 when we finally got to see the report May 30. We are still way ahead of normal, when it felt like we were behind 10 days ago.
Soybeans
There is worry in the market that planting in some areas will be late enough that acres will be switched to beans, however, and that is making beans defensive.
Take North Dakota as the most important one that is underplanted. The week before last, they had gone from 5% to 32% planted on the corn. Normal is 50%. In the same time, they went from just 2% of the soybeans to 20%, when normal is 33%.
Now, in Ohio, we have not been impressed with North and South Dakota. Do they really plant enough to matter? Well, yes. In the last few years, modern hybrids and reduced tillage regimes have accelerated the acres in the Dakotas to where South Dakota is the number five state for corn now, and North Dakota was ranked 11th last year. Ohio has gone from seventh (I think) to ninth for corn.
Intentions
Now comes the Planting Intentions report which said that North Dakota would plant an additional 800,000 acres this year. That is huge, except that they had record snow on the ground in March and April and got planting started late.
We have a leading expert speculating that North Dakota alone may under-plant the intended acres by 500,000 acres. The same man says we are probably already looking at a half a million fewer acres than we thought on March 31, and that would mean those acres go to soybeans. He thinks we could lose an additional half a million acres.
So, soybeans seem cheap, but we are getting them planted early, which we have proven pushes the yields, and we may plant more than we expected to.
South America
That gets us looking at South America, where Argentina is having a drought disaster that may give them half a crop of corn and reduced soybeans. They may not want to plant second-crop corn. However, Brazil and the little countries around them are expected to have a blow-out record crop that more than makes up for the small crops in Argentina.
Add to that the fact that soybean and especially corn sales to China are lagging, and we start hoping that farmers in other areas have weather problems to help our prices.
It is hard to get excited about a market plan that depends upon other American farmers struggling. Again, this seems unlikely with the fact that we are so far ahead of normal, but remember, in areas like the Dakotas, the Prevented Planting date for insurance comes May 25. In other words, it is now too late to plant corn in North Dakota.
It remains to be seen how we made out over the last week, but the weather was warm and dry, and I expect the holiday-delayed report that was out May 30 to show maybe the U.S. is getting to the 90% number for corn and the 70% number for soybeans.
So far, it seems the corn crop is headed for yields close to the 181.5 bpa the USDA proposed in recent reports. However, we usually “kill” the crop once a year, and that time would be June this year.
If we don’t see higher prices for corn in June, the party is over, and corn got cheap (as low as $4.90 3/4 for December futures May 18. July futures for the old crop got down to $5.47 the same day.
We may have an additional month to burn up the soybeans, but the next month is when the marketing decisions for corn have to be made.
