Prices continue to weaken on the futures markets in reaction to planting progress in the U.S., the higher dollar value and Brazilian harvest progress.
All of these factors are recent. The market was thinking that planting in this country was not off to a good start, but suddenly the NASS Crop Progress Report showed progress as better than average, although not by much.
The report April 15 put planting at 6%, better than the 5% average recently. Six states, including Ohio, have no official acres planted, but it is still just the middle of April.
It remains to be seen if planting progress remains higher than average, as we have rain in the forecast in the Northern Plains, Iowa and Wisconsin. We are expecting an inch-and-a-half. The 8-to-14-day forecast also has rain scheduled, and if that materializes, we would be looking at delays again.
Lows
Corn futures were sharply lower April 15, with the lead month May futures down 4 1/4 cents. Soybeans were sharply lower also, with the May down 15 1/2 cents. In the case of soybeans, planting progress was 3% for the nation, against a 1% average. The market mover for soybeans and the biggest factor was the pickup of harvest progress in Brazil, which is now at 84%. That harvest had been jawboned to be slowed by rains and hurt by a drop in conditions because of the rain. In fact, they are now on pace, and no one is talking much about expected weather damage to condition.
Chicago May wheat futures were off 4 1/4 cents April 15 with follow-through in early trading April 16 that is down another 1 1/2 cents.
Looking at the long-term trends, all three commodities show a big, steady break since the highs. May corn futures put the high in at harvest, at $5.20 3/4 on Oct. 20. The low came Feb. 23, at $4.11 3/4. That represents a loss on the charts of $1.09. We bounced to $4.48 in March, but we were trading at $4.30 early April 16.
The May soybean futures put in the high Nov. 15, at $14.19 3/4. The low was Feb. 21, at $11.33, but we bounced to $12.26 3/4 on March 21. We were most recently trading at $11.55 1/4 April 16. The May Chicago wheat futures had a high on Dec. 6 at $6.61 1/2, which then plunged $1.32 1/2 to $5.28 by March 7. We had a nice bounce to $5.74 3/4 April 4, but are now trading at $5.16 1/4 again.
Looking for trends
The spring season is a time when it is hard to see trends get established. The next three weeks are always critical in terms of planting timeliness. For example, we now have rain-caused planting delays forecast for large areas for a couple of weeks, but forecasts are notably tricky right now. If we miss the rain, we will be ahead of normal. If we get it, we may be delayed, but the delays don’t really matter much until the first week of May, as long as we catch up fast.
Fundamentally, the markets are weak, although we are trying to put numbers on the fact that we will be increasing acres of soybeans this year and decreasing corn. It remains to be seen if that prediction, coming from the end of March Planting Intentions report, holds true.
If the weather clears, farmers will overplant expectations of corn just because they can in good weather. Farmers prefer to plant corn in many areas, but the economics right now favor soybeans.
Of course, it is the summer weather that really determines the pricing for corn and soybeans. Corn prices tend to rally into the end of June and have some confirmation the first week of July. August is the critical month for soybean development. So, anything can happen and it is hard to predict at this point. By the time analysts will have good reason to predict the crops, it will be too late to do anything about it in terms of planting mix.
The reality is that even if we could predict prices, farmers will be ignoring markets and focusing on planting for a few weeks. We are cheap, so any planting or crop development problems would tend to help prices.
Hoping for improvements, however, should not be dependent on problems. We don’t ever want to bet against the ability of the American farmer to get a good crop.
