- The summer row crop markets have finally realised that farmers might not get all of their intended acres planted. Current prices are not encouraging producers to take on the risk, but more importantly, the forecast shows widespread coverage of 2-4″ rainfall across the Cornbelt. Prevent plant insurance will come close to a break-even payment for many farmers, but the market’s job is to encourage them to take on the risks of planting a crop. For many acres, that opportunity may not occur until June, when stiff yield penalties can be expected.
- Chicago soybeans were sharply higher overnight, and the rally continued through the day on fund short covering. Following the recent collapse in prices, China trade is no longer the market focus, rather planting delays and a wet 10-day forecast is getting attention. Low prices and planting delays are not incentivising farmers to go to the field, but encouraging them to take crop insurance options. NOPA will release crush data for April on Wednesday and ahead of the report crush estimates range from 158-164 million bu. This is down from 170 million bu in March, but also a record processing rate for the month of April. The Chicago crush spread averaged just over $1/bu in April and has rallied to $1. 20/bu in May, which continues to support USDA estimates for a strong US crush rate into the end of the summer. Chicago soy markets have rallied from deeply oversold conditions. However, farmers report that if wet conditions persist past final planting dates, they will opt to collect insurance. A much stronger rally (and good conditions) are needed to convince farmers to plant crops.
- Chicago corn futures confirmed that a seasonal low was scored Monday morning. July corn today surged 12 cents and traded easily through its 20-day moving average. The 20-day average has provided major resistance since late March. Additional resistance lies between $3.70-3.73. A close above this will likely trigger accelerated fund short covering. Planting progress is the third slowest on record. Widespread soaking precipitation returns to the heart of the Corn Belt this weekend/next week. Progress into late May will be limited. It is now the goal of the market to attract all possible acres. This year’s revenue insurance price was posted at $4.00. Only meaningfully higher prices provide incentive for producers to take the risk of extremely late seeding. Black Sea weather has become immediately more important. Any additional Northern Hemisphere production loss tightens the major exporter balance sheet further.
- US futures wheat rallied another 5-13 cents. Potential major corn production loss is a driver, but a number of wheat production risks are also occurring. It seems there is another week of rapidly spreading disease risk in the US. Near term heat and dryness will trigger steep soil moisture loss in Ukraine and Southern Russia over the next 10 days. Spring wheat areas of Russia will see too much rain and bitterly cold temperatures into late May. Work suggests major exporter wheat supplies will be adequate in 2019. Close attention needs to be paid to whether Black Sea soil moisture loss extends beyond the next 10 days. And cash HRW across the W Plains is valued at level money with corn. Wheat is fundamentally cheap below $4.50, basis July CME, until milling quality supply is known. Russian cash prices are up slightly today. The whole of the world market is in the process of forming a bottom. Major import tenders will return beginning in June.