Grain markets this morning are mixed following Friday’s selling activity and ahead of tomorrow’s April WASDE report.
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Grain markets this morning are mostly mixed following Friday’s selling activity and ahead of tomorrow’s April WASDE report. Going into the report, the market is seemingly focused on the very large short position that fund managers hold in corn, as well as what the USDA will say about South American harvests.
Last week, in the first full week of trading for the new month and calendar quarter, grain markets were mostly able to retain their gains for the week, albeit Friday, April 5th was a mostly down day for the complex. For the week, Minneapolis hard red spring wheat was the biggest loser while oats led the complex in gains (what do oats know, though?) For HRS wheat, no support has been able to be found from a technical standpoint, and there’s buzz that more spring wheat will get planted in Western Canada this year instead of canola, thanks to political issues.
April WASDE Could Be Very Divisive
Heading into the April WASDE report tomorrow, the market is expecting to see ending stocks for almost all commodities to grow a little bit.
This is mainly a reflection of this year’s March 1st quarterly stocks report in which the USDA shared some bearish surprises in the form of bigger numbers. Namely, a lot of focus of today’s grain markets are on corn and the extra 270 million bushels that the USDA found. Taking this bigger number into account for tomorrow’s April WASDE report might be a bit tough to swallow.
More specifically, Jerry Gulke ponders the USDA will factor it into lower demand or just take away acres from the 2019 crop.  After all, that 270 million bushels is basically the equivalent of 1 million acres of corn production and thus, Jerry correctly points out that losing a million acres to this year’s flooding won’t impact ending stocks, thanks to the aforementioned 270 million bushels found by the USDA.
Where it gets a little bullish in tomorrow’s April WASDE report is if the USDA is already starting to factor in some Prevent Plant acres and that bullish scenario catalyzes the massive short position to start covering. Regardless of the what the USDA thinks today though, more grain markets participants are thinking this year’s Prevent Plant acres in the U.S. could top 5 million acres (this would be well above the 3.8 million-acre average).
With every rain and flooding headline, there are more and more who doubt that U.S. corn acres will meet the 92.8 million acres that the USDA forecasted at the end of March. What is certain though is how ethanol production has been trimmed, which, in turn has pushed gas prices in some parts of the country to their highest in 5 years. 
Ultimately though, with the potential for less corn acres planted than what’s currently forecasted, the attention then shifts to what other players might come up with. Last week I mentioned in a FarmLead Breakfast Brief how soybean prices might be limited by South America, and that a surprisingly-larger corn harvest could also take away some export business from America.
While the USDA will say one thing in the April WASDE report tomorrow, CONAB will give us their own estimate of the soybean harvest on Thursday. However, there are doubts that they’ll raise their forecast from last month’s call of 113.5 MMT. Sidenote: Safras e Mercado pegs the soybean harvest at 83% complete, slightly ahead of the 5-year average.
Other Factors for Grain Markets
Apart from the April WASDE report, weather and China-U.S. trade negotiations will play second and third fiddle, respectively. For the former, the weather forecast suggests that significant rain, and in some places, snow will fall across the Midwest and Northern Plains this week.  Another storm system is expected to hit the region again in the middle of April. On that note, the market is expecting to see 1-2% of the U.S. corn crop planted in this afternoon’s USDA weekly crop progress report. For perspective, this week last year saw 2% of U.S. corn acres seeded, while it was 3% back in 2017.
Naomi Blohm of Stewart-Peterson recently did some healthy analysis of the relationship between U.S. corn planting progress, corn crop ratings, and final average corn yields.  While many players in the grain markets will focus on what has happened by mid-May (or Week 18 & 19 in the USDA’s crop progress reports), it’s important to remember it’s the weather thereafter that really matters. Yes, you can ascertain what a crop might look like based on its foundational acres that are seeded in the optimal timeframe, but all that can be thrown out the window if Mother Nature doesn’t give the crop a chance.
A few notable years include 1993, when it was super wet and average corn yields dropped more than 24% year-over-year to barely make 100 bushels per acre, as well as in 1995 when a July heatwave dropped corn yields 19% year-over-year to 113.4 bushels per acre. Of course, given the seed and equipment technology used today, we know that a crop can be planted very quickly and can withstand a lot of challenges that Mother Nature throws at it. Even the speculation of trouble though is what helps catalyze a market to rally, and this is worth paying attention to, given the large short position it’s sitting in.
At 7:35 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3303 CAD, $1 CAD = $0.7517 USD)
May Corn: +0.5¢ (+0.15%) to $3.63 USD or $4.856 CAD
May Soybeans: +2¢ (+0.2%) to $9.01 USD or $12.052 CAD
May Soybean Meal (per short ton): +$1.40 (+0.45%) to $309.40 USD or $413.86 CAD
May Soybean Oil (cents per lbs): -0.17¢ (-0.55%) to 29.98¢ USD or 40.10¢ CAD
May Oats: +2.3¢ (+0.8%) to $2.853 USD or $3.816 CAD
May Wheat (Chicago): -3.8¢ (-0.8%) to $4.64 USD or $6.207 CAD
May Wheat (Kansas City): -1.5¢ (-0.35%) to $4.298 USD or $5.748 CAD
May Wheat (Minneapolis): +1.3¢ (+0.25%) to $5.238 USD or $7.006 CAD
May Canola: -1.8¢ (-0.5%) to $10.356/bu / $456.60/MT CAD or $7.742/bu / $341.35/MT USD
COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.