May 31 – U.S. Plant 2019 Officially the Worst Ever

Grain prices this morning are in the red as traders take month-end profits off the board, despite Plant 2019 for corn and soybeans far from complete.

“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” – Theodore Roosevelt (26th President of the United States)

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May 31 – U.S. Plant 2019 Officially the Worst Ever

Grain prices this morning are in the red this morning as traders take month-end profits off the board, despite Plant 2019 for corn and soybeans far from complete. Put simply, all those traders who were once short (read: bearish) corn and soybean prices, have now exited those positions, and those who bought on the way up have also exited this position. Ultimately, this brings us back to a bit of a standstill. Worth noting is that canola prices have seen a nice rally this week on a weaker Canadian Dollar and the emerging drought in Western Canada. Thus, their pullback this morning isn’t as significant as the rest of the complex.

On the geopolitical front, President Trump has threatened to put a 5% tariff on all goods coming in from Mexico with incremental increases to that percentage if the flow of illegal immigrants from Mexico into the U.S. doesn’t slow. [1] Although the Mexican President has suggested that they will not retaliate, this potentially opens the door for Mexico to stop buying corn from the U.S. and instead look to other options. The most logical would be Brazil, where a record second-crop/safrinha corn harvest is taking place. [2] In this vein, total U.S. corn exports seem to be slowing down as through Week 37 of the 2018/19 crop year, 37.88 MMT of corn has bee shipped out, 6.2% above the pace from last year.

U.S. 2018/19 Corn exports through week 37 are tracking 6.2% higher year-over-year

Similarly, China is expected to slow its buying of U.S. soybeans until the U.S. slows its tariff escalation. [3]

Plant 2019 the Slowest for Corn Ever

Scott Irwin from the University of Illinois continues to put out some great insights and visual perspective on the state of Plant 2019 in the U.S. this year. On Wednesday, Mr. Irwin noted that “over the last 40 years, previous worst late planting years were 1993, 1995, & 1996. Plant 2019 progress as of Sunday was 29% behind 1993, 13% behind 1995, and 20% behind 96!!” [4] Further, he goes on to say that to help try to get a handle on where corn prices can rally to, it’s important to ask the question of “what corn planting Mother Nature is going to allow in the next two weeks” for Plant 2019. [5]

The U.S. Corn Plant 2019 is now the slowest on record

The U.S. Corn Belt for Plant 2019 is the wettest its ever been!

Given the amount of surplus moisture in the U.S. Corn Belt as noted in the chart above, this is an unprecedented situation. Literally, we don’t have any data or historical references that compare to what we’re seeing this year in Plant 2019. What we do know is that, with the rains this week, and the moisture in the forecast for next week, planting prospects have worsened in most areas. Accordingly, Mr. Irwin posits that up to one -third (or 31 million acres) of American corn acres will NOT be planted by Sunday, June 2nd. [6]

Right now, a Bloomberg survey suggests that traders are currently expecting at least 6 million acres of corn not to get planted, and instead will see Prevent Plant insurance claims made. [7] Given the wet weather, I would have to agree with Mr. Irwin that 6 million acres of corn going into Prevent Plant might be on the low side of things, and echoing what I said this past Wednesday’s FarmLead Breakfast Brief, there is likely more room to the rally in corn prices. On that note, the International Grains Council just cut their outlook for the global 2019/20 corn harvest, due to a worse outlook in the United States. [8] The IGC dropped its estimate for total world production by 7 MMT (or 275.6 million bushels if converting metric tonnes into bushels) to now sit at 1.118 billion metric tonnes.

QT Weather notes that the weather over the next week will continue to be wet not only across the Corn Belt to continue to stall Plant 2019, but also the U.S. Southern Plains where they’re just trying to get the winter wheat harvest started. [9] Accordingly, this will likely support wheat prices a bit more, something I mentioned a week ago.

The U.S. wheat harvest is unlikely to progress with the wet forecast into June 2019

Has Plant 2019 Affected Grain Exports?

The wet weather across America’s Heartland has also slowed down the ability of grain to move throughout the United States, namely through the river systems. According to the U.S. Wheat Associates, this has helped demand for U.S. hard red winter wheat exports a bit, as sales have been increasing over the last few weeks. [10] The demand is there too, as we know competing countries from the Black Sea are slowing down their shipments.

The Agriculture Ministry in Ukraine said this week that total grain exports are tracking nearly 27%, or 10 MMT more than this time a year ago. Comparably, in Russia, there’s seemingly no let-up in their grain exports, especially wheat shipments are only finally slowing down, albeit the second-largest wheat harvest ever is expected to start up soon. [11] SovEcon estimates that winter wheat acres in Russia this year are at a record high of 38.8 million, which would produce an 83.4 MMT crop (the record was set in 2017/18 at 85 MMT), while they think that Ukraine is expected to bring in a record 28.1 MMT wheat harvest.

Elsewhere, grain ports in the ultra-important Argentina city of Rosario have shut down, putting grain exports there at a standstill. [12] The country is entering a recession and the nationwide strike by workers at ports, airports, and other locations is in protest of the austerity measures being implemented by President Mauricio Macri.

On the other side of the equator, workers at the Port of Vancouver (the Canadian one) have been locked out as part of a labour dispute over technology changes, namely automation potentially killing off jobs. [13] This could potentially grind Canadian grain exports to a halt, and at a time when the opportunity to ship is probably greatest (except for maybe canola!). In fact, Canadian non-durum wheat exports are certainly on track for a new record, as through week 43 of its 2018/19 crop year, 15.24 MMT has been shipped out, 14% above last year’s pace.

Canadian 2018/19 non-durum wheat exports through week 43 are tracking 14% higher year-over-year

Ultimately, traders will continue to watch any updated weather maps with a very close eye. At this point, the market is likely to get long on wheat and corn prices, but geopolitical entanglements are slowing the gains in soybean and canola prices. That said, with this extra moisture falling on top of the already-soaked U.S. Midwest, traders are likely to have a bias towards getting long the market. ‘

Have a great weekend!

To growth,

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

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 = $1.35 
CAD, $1 CAD = $0.7408 USD)

July Corn: -10.8¢ (-2.45%) to $4.255 USD or $5.758 CAD
July Soybeans: -5.5¢ (-0.6%) to $8.835 USD or $11.955 CAD
July Soybean Meal (per short ton): -$2.60 (-0.8%) to $324.80 USD or $439.51 CAD
July Soybean Oil (cents per lbs): -0.29¢ (-1.05%) to 27.49¢ USD or 37.20¢ CAD  
July Oats: -2.5¢ (-0.8%) to $3.155 USD or $4.269 CAD
July Wheat (Chicago): -10¢ (-1.95%) to $5.04 USD or $6.82 CAD
July Wheat (Kansas City): -10¢ (-2.1%) to $4.69 USD or $6.346 CAD 

July Wheat (Minneapolis): -7¢ (-1.25%) to $5.565 USD or $7.53 CAD
July Canola: -3.2¢ (-0.3%) to $10.38/bu / $457.70/MT CAD or $7.671/bu / $338.24/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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