May 29 – Corn Prices Running Away with Prevent Plant Acres

Grain markets are once again in the green, led by corn prices, as speculators continue to unwind their short position due to the bullish delay in Plant 2019.

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May 29 – Corn Prices Running Away with Prevent Plant Acres

Grain markets are once again in the green, led by corn prices, as speculators continue to unwind their short position due to the bullish delay in Plant 2019. There’s quite a lot to digest since Friday’s FarmLead Breakfast Brief so grab your breakfast and let’s dig in.

Corn prices are now sitting at their highest levels since 2016 while soybean prices have been able to get back to their highest levels since mid-April. Rain is expected to continue to fall this week across many parts of the Midwest and Eastern Canada, hardly giving farmers the chance to get any fieldwork in, but giving traders more of a bullish nudge to continue pushing grain prices higher.

This morning’s strong move to the upside (see futures prices at the bottom of this column) follows yesterday’s big gains. In Tuesday’s trading, corn prices gained 2.7% and pulled the rest of the complex higher. If we’re including this morning’s big move, corn prices have jumped nearly a dollar from their lows seen a few weeks ago. In fact, through this morning, corn prices have rallied more than 20% since the beginning of the month of May, while Chicago wheat prices are up more than 21%! Comparably, oats are up almost 13%, whereas canola is up almost 5% and soybeans have retraced all their trade war losses to sit with a 4% gain for the month.

Corn Prices have rallied 20% in May thanks to a bullish delay in Plant 2019

Want to Plant? You Can’t

According to various weather forecasts, the rain will continue to batter the Midwest this week, although precipitation will be less intense than recent weeks. Rightfully, traders are just focusing on the fact that it’s going to rain, not how much precipitation will fall. This in mind, the National Weather Service is saying that six times the normal amount of rain has fallen in much of the Midwest, Northern Plains and Southern Plains in the past 2 weeks!

The USDA released their weekly crop progress yesterday afternoon, delayed by one day due to the Memorial Day holiday on Monday. [1] Going into the report, the market was expecting to see 65% of U.S. corn acres and 30% of soybeans planted. Instead, the USDA says that 58% of U.S. corn acres had been seeded through May 26th, well behind last year’s pace and the 5-year average of 90%. This means that there were 53.8 million acres planted as of Sunday, which translates to 39 million acres of corn that still hasn’t gone in! Also, as Karen Braun of Reuters points out, the 32% of the U.S. corn crop emerged through Sunday is a new record by a long shot. [2] For soybeans, 29% of acres are now seeded, but that’s also way behind the 74% completion rate at this time a year ago and the five-year average of 66%.

U.S. corn emerged through May 26, 2019 is the slowest on record

It’s likely that Corn Belt states, Minnesota, and Wisconsin could all see new record highs in terms of corn Prevent Plant acres due to the wet weather. Very concretely, the University of Illinois’ Ag Economics department is suggesting that it now appears certain that total Prevent Plant acres for corn across the entirety of the United States could pass the record of 3.6 million acres set in 2013. [3] AgriCensus reports that Risk Management Commodities is likely the most bullish, suggesting that there could be 10 million acres to Prevent Plant corn and 3 million acres of Prevent Plant soybeans!

The University of Illinois ag economists also suggest that when late planting is 10% or more behind the average, the chance of corn yields being below trendline is 83% and the average loss is about 6.1 bushels per acre from the current forecast of 176 bushels per acre. Using a reasonable estimate of 5 million acres of corn acres lost to Prevent Plant, they suggest that corn prices could head to $4.50 USD/bushel since 2019/20 endings stocks could drop to 1.528 billion bushels from the 2.485 billion bushels estimated in the May WASDE report. [4] Should 10 million acres of corn go into Prevent Plant, ending stocks could drop to 1.005 billion bushels and corn prices could climb to $5!

Quite simply, the hit on corn yields is certain by now; the market is now trying to figure out what are acceptable corn prices relative to said possible yield and ending stocks scenarios. It’s unlikely that this will be figured out this week, meaning the rally in corn prices (and likely, the rest of the complex) will likely keep going into at least next week. [5] Similarly (and as I mentioned last Friday), I believe that the highs of canola and spring wheat prices could be seen in the next 2 weeks or so.

On that note, the market was expecting to see 87% of the spring wheat crop drilled in through this past weekend, but the USDA says that only 84% is planted. This is only slightly behind the 89% seeded a year ago at this time and the 91% five-year average. For winter wheat, the crop lost 5 points in the past week in the good-to-excellent (G/E) category to now sit at 61% as all this moisture impacts the quality of the crop.

Anything Other Than Corn Prices to Note?

Not much else is gaining headlines in the grain markets right now other than the state of Plant 2019 in the U.S., but I’ll try to help you stay on top of some of the other happenings.

One notable is that China imported 1.75 MMT of Americans soybeans in April 2019, up nearly 250,000 and 16% from March. [6] However, since the trade war negotiations are at a standstill, there’s another 6 MMT of US soybeans bought by the People’s Republic that might not get actually shipped. Conversely, China bought 5.78 MMT of soybeans from Brazil in April, more than double the 2.79 MMT bought in March. Sidenote: earlier this week, we shared on social media an article worth reading about how China’s own farm subsidies could become a major obstacle in ending the trade war between them and the United States. [7]

Coming back to the U.S., farmers in areas that aren’t the Midwest are still planting! However, in places like South and North Dakota, temperatures haven’t been conducive to jumpstarting the growth of a crop. [8] Similarly, parts of the southern Manitoba and southeastern Saskatchewan got hit with a frost earlier this week just as crops are popping out of the ground. [9] Concretely, temperatures haven’t helped get the crop going in many areas of Western Canada, and there hasn’t been much moisture either.

Through May 23, 2019, the Canadian Prairies have received less than half of their average precipitation since the beginning of April

Drew Lerner of World Weather Inc. notes that the Canadian Prairies will stay dry for potentially another 2 weeks before Mother Nature provides some moisture relief. [10] Conversely, Drew says that Eastern Canada, like the Midwest, is going to remain wet for another few weeks. [11]

Overall, the bullish run in corn prices is justified; the question to answer now is just how much bullish stamina do traders have?

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

At 7:15 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.35 
CAD, $1 CAD = $0.7408 USD)

July Corn: +16.5¢ (+3.95%) to $4.368 USD or $5.896 CAD
July Soybeans: +28¢ (+3.25%) to $8.84 USD or $11.934 CAD
July Soybean Meal (per short ton): +$10.50 (+3.35%) to $323.30 USD or $436.45 CAD
July Soybean Oil (cents per lbs): +0.63¢ (+2.3%) to 27.92¢ USD or 37.69¢ CAD  
July Oats: +7.8¢ (+2.45%) to $3.245 USD or $4.381 CAD
July Wheat (Chicago): +12.3¢ (+2.45%) to $5.17 USD or $6.979 CAD
July Wheat (Kansas City): +14.8¢ (+3.2%) to $4.755 USD or $6.419 CAD 

July Wheat (Minneapolis): +8.5¢ (+1.5%) to $5.66 USD or $7.641 CAD
July Canola: +8.5¢ (+1.6%) to $10.39/bu / $458.10/MT CAD or $7.696/bu / $339.34/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.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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