- Chicago corn, soybean and wheat are adding weather premium for future US supply losses. July corn has rubbed up against Wednesday’s high at $3.80 with futures carving out a key reversal. Wheat and soybeans have followed amid new end user pricing and managed money short covering. Funds have covered an estimated third of their Chicago short corn/soybean/wheat short positions. It will take weeks before managed money has completely covered their bearish Chicago bets. The volume of Chicago remains robust, and surprisingly, Chicago final corn open interest rose on Wednesday. It appears that farmer selling of cash corn is helping to balance some of fund buying. Farmers are using the rally to sell corn while they are continuing to store 2018 soybeans.
- Estimates suggest that US farmers will have seeded 48-52% of the US corn crop through Sunday (May 19), up some 18-22% from last week, but well behind historical averages that are near 90%. Amid the forecast that is extremely wet for next week, we look for US corn seeding to be 62-67% completed on May 27. This leaves 30% of the intended 2019 US corn crop to be seeded after June 1, 28 million acres, when US corn yield drags are projected to reach 15%. US soybean yield potential also falls 15% for beans planted after June 1.
- If you assume a 15% decline in US corn and soybean yields for early June seeding, it would amount to another 700 million bu of lost corn production and potentially as much as 380 million bu of soybeans (assuming 40% of the US soybean crop is seeded on May 27). The supply impact on soybeans is larger than corn amid their latent seeding pace and the coming heavy rains next week. There likely would be some gain in US soybean seeding from corn, but this all depends on the number of acres that US soybean farmers enroll in Prevent Plant (PP). Remember that most US soybean farmers do not have any fertiliser or chemicals down, which makes the PP option very attractive.
- US Weekly Export Sales for the week ending May 9 were; 4.2 million bu of old crop and 15.4 million bu of new crop wheat, 21.8 million bu of corn, and 13.6 million bu of soybeans. China shipped out another 4 cargoes of US soybeans last week as they continue to execute on prior purchases. There is no indication that China is NOT going to ship out their existing US old crop soybean purchases of 7.1 million mt, after last Friday’s breakdown in US/China trade talks.
- NASS will start releasing US corn/soybean crop conditions when more than 50% of the crop has emerged. We doubt that that will occur until the second week of June. And amid all the rain/cool temperatures, corn in the ground looks ragged with populations said to be down from last year. The point is that producers and others are not going to rate the 2019 US corn/soybean crop anywhere close to prior years for which the algos will estimate falls in yield potential.
- The midday GFS weather forecast is just as wet as the overnight run, but the heavy rain is farther south and east into E IA, MO and the northern half of IL. This area could endure 3.50-7.00″ of rain over the next week that would induce widespread ponding/flooding. The N Plains and the remainder of the Midwest would see rains of 1.50-3.00″. A trough/ridge pattern holds across the US with the strength of the SE ridge being slightly weaker than the overnight run. This allows for a frontal boundary to be farther south and adversely impact the Midwest areas that are wet (and well behind on seeding). The wetness dramatically raises the risk to US winter wheat in heading/blooming. This not the forecast that farmers wanted.
- Weather is all important with excessive rainfall and another round of cool temperatures to limit US spring seeding next week. Any crops planted in June have significant yield drags (15% for corn/soybeans) and the market will have to encourage producers NOT to wholesale accept the PP to maintain adequate US 2019/20 corn stocks. Soybean futures could get spicy if more than 50% of the US soybean crop is to be planted in June. This is a supply driven bull.