We are being buried under a deluge of reports of matters that influence grain prices. Choosing how they all net out is the real challenge this week.
On my notepad this evening, I have six reasons listed for why corn prices could have gone down or up last week. I don’t think I would have predicted what prices actually did, even if I had known the facts in advance.
Ask farmers what is affecting prices this time of year, and you will find the focus is on planting progress. Farmers think they are waiting on the weather, and it seems like little is done. As a result, they can’t understand why prices are declining.
Progress being made
In fact, the U.S. Department of Agricultural Planting Progress report, out each Monday, is reporting more progress than usual, though it may not feel like it to the farmer.
As of April 29, Ohio was shown to be 10% planted, with 7% being the average. We are up from just 6% last week, but had only 3% in on this date last year.
It is a similar situation for the nation as a whole. We have 26% planted, and that is exactly our five-year average for the date. The totals are helped by the progress in states like Illinois, where they have 40% of the corn in, way ahead of the 29% average.
It is in May that this report becomes critical, as the market expects to see 75% of the crop planted by May 15. That progress tends to support no loss of yield.
Outside forces
The actual biggest effect on corn prices was from two large corn export cancellations by China. They totaled 560 MMT of corn, and that’s a big deal.
Remember, China did not buy much corn at all from us until the Phase One agreement. That got us used to big exports to them, and we are struggling to make the adjustment that comes if they don’t buy as much as they did last year.
Then, we have the influence on the market of the very poor corn crop in Argentina. They now estimate a production of 36 MMT of corn. Last year, they produced 52. Of course, they use a lot domestically, but this still cuts the world’s supply of corn that “can float,” as traders say.
Additionally, the Argentinians say they have corn stocks of 4.3 MMT, but the U.S. experts say they have only 1.5. That is a big difference. All of this should be bullish for prices, but it seems to have been in the market a long time ago, and the effect is being ignored in favor of bearishness in China export news.
The Ukraine crop is a bigger factor than I used to realized, because so much of it is exported. This year they may have only 22.9 MMT produced, compared to 26.7 last year. And, there is some doubt if it gets shipped, given that the Russians want to stop the Black Sea agreement if China will let them.
The last factor is the increase in ethanol grind. We used almost 10% more corn in the ethanol business in March than we did in February. Again, this would be seen to be bullish, but we did not see that result.
What we did see was a drop of 44 cents in the July corn futures for last week, although we finished the day session up a quarter of a cent May 1, and the evening session is up three cents as I am writing this.
Maybe there is hope, although the biggest hard news would have been good planting progress, so I see this three cents as just a dead cat bounce (“even a dead cat will bounce a little”).
Soybeans
That gets us to soybeans, which lost almost 58 cents on the July futures last week. The price actually turned up April 28 to the tune of more than 17 cents, and we are 32 cents above the April 27 low as we were trading May 2, at $14.34.
The soybeans have had some interesting news, such as a trucking strike in Argentina that could have been an interesting deal, but only lasted a day.
The poor Argentine bean crop, as we have discussed, is being more than replaced by a record crop in the rest of South America. Our exports are at the lowest level since September. That could be considered negative, except that is a function of seasonality.
We normally stop exporting soybeans this time of the year, as the buyers turn to South America. The foreign nations actually took our beans longer than normally, as the exporters in Brazil are working to pry them from farmer hands. The farmers like to leave them in the bin as an inflation hedge against a failing currency.
Wheat
The wheat market remains a mystery, as we continue to trade at pre-war prices even with the bread wheat hurting in an extended drought.
Our cookie wheat is having a great growth period, and the result may be the reason that we had lost 55 cents at one point last week. The hard news that can’t be ignored is that the spring wheat is not getting planted in Minnesota and the Dakotas yet, since snow is still melting there.
