The grain markets finally brought some good news last week in the form of a major reversal in corn futures and a 17-cent gain in July soybean futures. In addition to gains in the spring harvest, all three wheat futures markets posted gains, with Chicago wheat futures up 27 cents.
Right now it feels like we’ve found a bottom in markets that have been falling even when they had good news. After watching the markets on May 8th, I am nervous that this was just a dip.
reversal
Yes, corn had a key turn last week. In fact, it ended the week 27 cents below the low. However, after hitting a high of $6 on May 8th, it closed unchanged and then had lost five and a half cents in the evening session on May 8th.
We were last trading at $5.91. It will take a few more trading days to gain confidence that we are moving significantly higher. Similarly, December corn futures gained over six cents for the week, but lost a nickel during the day on May 8th and we were over six cents lower in the evening. This doesn’t look like a bullish market.
The reality is that the old and new crops have different reasons to trade into mid-year. Legacy crop price is a function of corn supply from crop 2022 added to export and domestic demand characteristics.
The new crop is more a function of planting weather and assumptions about the size of the crop we will be planting in 2023. How will the harvest be?
Plant
We will get the first production numbers from our friends at the US Department of Agriculture on May 12th. At this point in time, we are assuming good planting and growth conditions and assume that we have planted significantly more hectares than last year.
If you live in Ohio, you might think that timely planting just isn’t going to happen. It feels like we’re running late, and most farmers I speak to have grown little or no corn. Those who planted it in the first 10 days of April are unsure they made a good decision, given the cool, damp weather since then.
Ohio is actually 11% planted, up just 1% from last week and now below the 17% average. The first farmer I spoke to this morning was in the process of towing a caterpillar hoe to a field where there was standing water.
Fixing tile lines wasn’t what he actually wanted to do today, but there is hope that temperatures from last week’s 40s will rise to 70s this week. Then we will see a lot of plants and a little sleep for a few days.
As usual, I joined my regular Monday morning conference call in the Midwest and overheard most of the farmers and marketers talking about growing most of the crops. They seemed surprised that I couldn’t tell them Ohio farmers were hard on it.
When the USDA Crop Progress Report came out, most of them even overestimated how far the planting had progressed. The US is 49% planted, which is 7% more than our five-year average.
Keep in mind that the market expects 75% of the corn to be planted by May 15th. Traders assumed this would happen and we would not see any yield losses from late planting. However, we now only have a week to plant 26% of the crop. I wonder if that is possible.
soybeans
Looking at soybeans now, we see a similar 17 cent gain in July futures last week. I would argue that this is a much smaller gain given the relative prices compared to the corn.
The big bump came on May 5th, up 18 3/4 cents for the day. That felt like a reversal of trend until we took off almost four cents on May 8th and we’ve lost another nickel so far this evening session.
July soybeans traded at $14.28 on May 8th, a far cry from the $16 we were hoping for a few months ago. It felt a lot better when $16 seemed possible and we had a shot at $7 corn.
inputs
It helps that some of our inputs have turned out cheaper than expected, especially nitrogen fertilizers. Of course, many of the inputs were priced and paid for before spring to prevent us from having to pay the high prices now, which hasn’t happened.
It’s a mystery why futures prices for nitrogen fertilizers didn’t boom in the Gulf. The upper Mississippi is closed due to flooding and we predicted we would be short of nitrogen because we had cheap natural gas and the cheapest fertilizer.
We’ve been exporting it all winter and expect it to go out this spring if we don’t have record imports hauling up the Big Muddy. We were wrong!
The trend in growing soybeans in recent years is to plant them in April, before corn. Some of those acres have been frozen this year, but USDA planting progress numbers show 35% done vs. the normal 21%, even with slow progress in the east.
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