Grain markets this morning are again all in the red as the complex has whipsawed around Prevent Plant, trade tariffs, and weather all week.
“We are all born naked into this world, but each of us is fully clothed in potential.” – Emmitt Smith (NFL Hall of Fame running back)
June 7 – 2019 Prevent Plant vs Yield vs Price Potential
Grain markets this morning are again all in the red as the complex has whipsawed around Prevent Plant, trade tariffs, and weather all week. Wheat and corn prices continue to see the most volatility, including Chicago soft red winter wheat prices closing almost 20¢ higher in yesterday’s trading action.
Before we get into the thick of the Prevent Plant data and other factors, this morning I’m asking that you take a few minutes and answer a 5-minute survey on how you sell or buy grain. Once completed, you can join an exclusive list of FarmLead readers/users to test out our newest product before it launches in a few months. Thanks in advance for your opinions/time! Let’s dig in.
Starting in politics, U.S. President Donald Trump tweeted out that, on Monday, June 10th, 5% import tariffs would be implemented on Mexican goods coming into the U.S., and that percentage could easily rise as high as 25% “until the illegal immigration problem is remedied.”  Mexico has vowed to retaliate but it’s rumoured that corn will not be on the list of U.S. goods impacted, which is significant considering that the U.S. exported more than 15.5 MMT of corn to its southern neighbour last year in the 2017/18 marketing season!  Interestingly enough, Mexico has already been buying small volumes of corn from Brazil. 
Corn Prevent Plant Acres Likely a New Record
On Tuesday, one day before you could plant corn and still receive government crop insurance or decide if you wanted to take Prevent Plant, Farm Journal came out with an interesting survey.  The agricultural media firm says 20% of the responding farmers would Prevent Plant 50% of their corn acres! Granted, the sample size is just 1,000 farmers, but that’s still a good barometer of where things sit in terms of Prevent Plant. I’ve referenced ag economist Scott Irwin from the University of Illinois a few times in the last couple of FarmLead Breakfast Brief columns, notably being spot on with his estimate of how many corn acres would be in the ground for Plant 2019 by Sunday, June 2nd. This week, Mr. Irwin thinks that corn planted acres will go from this past Sunday’s 67% to 81% as of Sunday, June 9th. 
This in mind, drier weather in the Eastern Corn Belt is finally showing up and farmers in Ohio, Indiana, and Michigan – all places that are well behind in planting corn – are aggressively getting into the field.  Illinois is still wet, especially in northern parts of the state. We won’t know the impact of this increased productivity until next Monday’s crop progress report from the USDA, but the question that is being asked, “is the weather market over?” 
At this point, the late start of Plant 2019 and the number of corn acres going into Prevent Plant (estimated between 6 and 10 million) will have a legitimate impact on production. The bigger question I’m asking though is, with this late start and average weather, what’s the yield potential of these fewer corn acres? Ryan Maue of Weather.us points out that next week, the Corn Belt are going to see temperatures significantly below average (all the green area in the image below). 
Ultimately, I think we’re moving from a weather market into a yield debate. Therein lies the true rallying call for corn prices in that, U.S. corn yields are unlikely to come close to the USDA’s current forecast of 176 bushels per acre (bpa). I’ve seen estimates as low as 160 bpa, but I think we’re probably going to end up with an average U.S. corn yield somewhere between 163 and 168 bushels per acre by the January 2020 WASDE when final numbers are released. If this is realized, and corn prices continue to trek higher, one must intuitively ask, when will demand fall off (AKA demand rationing)?  Overall, I think corn prices will continue to be influenced by Prevent Plant numbers, and then as we get into July, speculation on yield potential.
What About Pulses, Canola Prices?
I’m getting a lot of questions about pulses and canola prices lately from FarmLead users in the U.S. Northern Plains and Western Canada so I’d figure I should share some of my thoughts on these topics with the broader FarmLead audience.
Put simply, canola prices have been supported by hot, dry weather in Canadian Prairies. More generally speaking, all crop development in Western Canada is behind their averages.  There was some rain in the weekend forecast for most of Alberta and Saskatchewan, but that significant moisture event for the latter seems to have now been pushed out until Monday or Tuesday next week. Some light showers were seen in the last 24-48 hours in parts of Alberta and Saskatchewan, but their coverage and duration aren’t enough to alleviate all dryness concerns. Exacerbating the situation is that, with the dry conditions, flea beetles are having a grand ole’ time, snacking on plants that have been slow to emerge. 
Ultimately, It’s clear that trade issues with China have lowered canola prices, relatively to what true demand is. This has likely helped them in their purchasing of Canadian canola from exporters who still have their license to ship canola to the People’s Republic. Somewhat related is the slowing export volumes for peas and flax as we near the turnover of the Canadian crop year.
This allows us to turn our attention to pulses, and the immediate talk is in India. Chuck Penner of Left Field Commodity Research is always on the ball here and notes the Indian government is looking to buy more pulses but their rhetoric has changed from “maintaining” prices to ensure that “prices are under check” which basically translates to controlling prices.  As mentioned in Tuesday’s FarmLead Breakfast Brief, there are some drought concerns in India, but the rainy, monsoon season is just starting now and will last 4 months through to September. Overall, old crop green pea prices have been performing the best but, in general, pea prices have slowed with the export activity. Conversely, lentil prices have maintained their strength as we know India is still buying, albeit their demand is a bit spotty. 
Finally, just a note on feed barley prices. We are now seeing $6 CAD/bushel delivered into Lethbridge for old crop supplies on the FarmLead Marketplace. If you have some old crop green peas or barley, now is the time to be posting it (click here to do so) as, at this point, the possibility of no rain could certainly help prices a bit, but the downside risk is more significant. As a reminder, grain price rallies get built up slowly over a couple of weeks or even months, but once the top is hit, it only takes one week for a lot of those gains to be erased.
Have a great weekend!
At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.33 CAD, $1 CAD = $0.7519 USD)
July Corn: -2.3¢ (-0.55%) to $4.183 USD or $5.563 CAD
July Soybeans: -4.3¢ (-0.5%) to $8.645 USD or $11.498 CAD
July Soybean Meal (per short ton): -$1.30 (-0.95%) to $314.60 USD or $418.41 CAD
July Soybean Oil (cents per lbs): -0.15¢ (-0.55%) to 27.61¢ USD or 36.72¢ CAD
July Oats: -2.8¢ (-0.9%) to $2.975 USD or $3.957 CAD
July Wheat (Chicago): -4.5¢ (-0.9%) to $5.055 USD or $6.723 CAD
July Wheat (Kansas City): -2.8¢ (-0.6%) to $4.525 USD or $6.018 CAD
July Wheat (Minneapolis): +0.8¢ (+0.15%) to $5.658 USD or $7.524 CAD
July Canola: +0.2¢ (+0.02%) to $10.315/bu / $454.80/MT CAD or $7.756/bu / $341.96/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.