For the most part in the markets this has been a week we wish we could forget. Hopefully everyone was busy in the field rather than staring at the board getting mercilessly pounded each day. I know it is of limited comfort, but hopefully some comfort nonetheless, to know that most market participants are also shell shocked. We went from a situation in the fall/winter where if any one of many things would have gone our way, we would have seen a significant rally in corn. One by one they have all gone against us so far. Despite a record crop, domestic old crop stocks were going to tighten significantly; USDA found nearly 300 million extra bushels on the stocks report. Ethanol demand was going to stay strong; so many waivers were issued by the EPA it reduced the grind even further than the tight margins were going to. World balance sheet was projected to be the tightest since the 1970’s; South America is projected to add over 800 million bushels to the balance sheet. We could go on but more important than listing the things that have gone against us, is looking forward to the things we have left that can still fall in our favor.
One reason the market has not reacted strongly to the possibility of a planting delay is that the additional old crop stocks in the US and the world, take some of the pressure off the new crop. With extra corn in the bins, we do not need to get 92 million acres planted. The market SO FAR remains confident that we will get ENOUGH planted. That could change if the cool/wet pattern continues to hold well into May. The upside potential for a planting delay rally has been reduced by all the old crop and new crop corn that producers have left to price. If the funds get spooked and start to buy, there are a lot of people waiting for the opportunity to sell. Even though the upside has been reduced, THERE IS STILL UPSIDE ON A PLANTING DELAY. The funds have a record short position and they will have to get out at some point but we need to have realistic objectives to price into. New crop corn is trading around $3.80 vs December and if it approaches $4, we may pull our order down or price some a little before $4. Crude is rallying and that helps ethanol margins so that is another bright spot.
Soybeans have had a worse week than corn has. All the rain that may delay corn planting and is positive for corn, adds to the negative for beans as it means more acres may be shifted to beans. There are additional encouraging rumors about progress toward a trade deal, but after falling for so many rumors before it becomes harder for the market to believe rumors. Soybeans need a trade deal as US stocks are projected to swell to close to a billion bushels.
Wheat fundamentals continue to turn more negative as rains are forecast for dry parts of the Ukraine. There are some dry pockets in the world but not enough to turn the trend so far. Exports have been above expectations as we are competitive in the world market but there is not a major production story the bulls can grab onto right now.
Cotton once again has been the lone bright spot. However seasonally cotton generally gets negative after the crop is planted. Planting progress was not far behind the averages in cotton. If you have not gotten started on pricing cotton with the model farm, you need to begin. Start scaling in sales now.