Monday afternoon planted progress was reported at 67% which was well below market expectations of 75% and also significantly below the 5 year average of 96%. Everyone expected a sharply higher open and a distinct possibility of reaching new highs. The market opened higher but was unable to push to new highs and settled back for a very disappointing day and has struggled to get much traction the rest of the week. There is a window of dry weather in the Midwest right now and producers are trying to take advantage of it. Social media is filled with pictures of planters rolling in the Midwest. The funds appear to even have built back a short position albeit smaller than the record short position they had before. However, we do not believe this window of planting has fixed everything. It is June 7th not May 7th. Everyone in the Midwest is past their crop insurance plant date and are losing guarantee every day. A lot of research goes into the crop insurance plant dates, they are not just pulled out of a hat. The research says that you have lost a significant amount of yield potential past the final plant date. We are so far past any other analogous years we do not know how much yield potential we have lost and we will debate it all summer. We have data from trials of late planting, but we have never planted the whole crop this late. This is not like other planting delay rallies that we get a quick pop and then may not get another opportunity. We will have a lot of volatility this summer as we debate how many acres were actually planted and what the yield potential is. We will get USDA’s wild guess next Tuesday at 12 on their Supply and Demand update the day after we get planting progress and crop condition Monday at 4 pm. The planting progress update may be wild since we do not know how they will take prevented plant acres into account. We also get our first look at the crop condition ratings. Many of the acres that actually got planted on time may be worse off than the later planted corn right now because it has been sitting in cold wet soils for so long. As soon as we process that information, we get USDA’s supply and demand the very next day. We do not know how USDA is going to adjust their balance sheet. Typically they do not adjust yield or acres this early but will they feel the need to this year with the unique circumstances? Until this week, this rally had been straight up because the only thing on everyone’s mind was how wet it was. Now we are debating what the actual numbers are and there are a lot more variables to consider. I do not think we have reached the highs yet, but we are not going to go straight to the highs without some setbacks. If the weather turns off perfect for the rest of the growing season, we will struggle this summer to hit those new highs because the yield and acreage question will not be answered until fall/winter. With the weather we have faced so far this year, I see that as a long shot but it is a possibility.
There are a lot of variables and many questions that will not be answered until this fall/winter. We lost yield potential ourselves with the heat we endured and there are still a lot of questions about how much yield we lost. Rail values are going up and basis is going to be strong even with boats coming from South America. $4.30 Dec futures should be well over $5 corn. If you are comfortable that you still have production to sell, be ready to do some on the next bounce. You are protecting profit at this point, not trying to hit the top of the market. You can buy calls or re-own on paper to participate in the rest of the rally. We need to be focused on selling profit, not trying to pick the market!
Soybeans have been content to let corn have all the fun until last week. Last week the bean market started getting concerned but this try window to plant has reduced some of that fear. Beans still face a near record fund short position. There is some yield potential loss in soybeans but it is not quite as dramatic as for corn and that is why the market reaction has been more muted. The market also does not need all acres to shift to beans. Corn is going to have to ration some demand, beans still have a very comfortable balance sheet cushion. The talks with China are also getting worse not better. There are some meetings coming up in the middle and end of this month, but the rhetoric has been getting worse. The best chance for a big move in beans is getting the funds spooked. If they feel the need to cover some shorts we could see a quick move in beans. We need to be ready to sell beans on moves above $9.
Wheat has been the leader a few times this week for the first time in the move. For most of this corn rally, wheat has been an unwilling participant pulled up by corn. Condition ratings on wheat actually improved this week which pressured wheat early in the week. The market is starting to get concerned about dryness in the Black Sea region, parts of Canada and Australia which all need to be watched. On a short crop of corn, wheat can also be fed which would help reduce any excess stocks too. Our basis is getting stronger as the crop in Ohio keeps getting wet and how few acres we planted this year in our markets. Wheat harvest has started off with 60+ pound test weight in most of our areas but the forecasted rain will take some of that weight. There has been a little vomitoxin showing up in fields that were not able to be treated with a fungicide, even in samples with 60+ TW and no appearance of pink or ghost kernels. Basis started out at $1.00 in NC and should only get stronger. Please let us know as you get wheat in the bin and we can make a plan to move it. It is a sellers market in wheat this year!
Rain in Texas and lack of progress on trade has really weighed on cotton. Economic indicators still look good, but cotton needs a deal on trade. We are concerned about what USDA could show us on the supply and demand report Tuesday as the demand side of the balance sheet may be adjusted lower, potentially increasing ending stocks to 6.6 million from 6.4 million bales. We need a deal on trade!
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