May 22 – Wheat Prices Pop on Weather Concerns

Wheat prices rallied again on Tuesday as investors reacted positively to yesterday’s crop progress report.

Yesterday, your humble agricultural economist was out of the office.

But today, our humble brag turns our attention to the ongoing rally in soybean prices.

As we have said time and time again, the ongoing spat between China and the United States has been nothing more than political noise.

Naturally, the threat of tariffs by China would provide a significant weight on prices. The worst-case scenario was played over and over again in the pages of the Wall Street Journal and on CNBC. But we have held the argument from the onset of this issue that political chatter would not be backed up by a long-term suicide pact between the two countries.

Why? There is simply too much money at stake. And, both nations recognize that cooperation is a far better alternative than an isolationist competition. With that in mind, we recognize that these ongoing trade spats – be it the TPP, NAFTA or U.S-China bilateral terms – have a negative impact on the North American farmer. Giving other nations a reason to seek crops from an alternative source of origin is a bad idea. As we noted over the weekend in GrainCents, the damage is done. The question is how our trade associations will respond to ensure quality and quantity to new and existing markets around the globe.

Now then, let’s dig into grain prices at the Chicago Board of Trade on Tuesday.

Wheat Prices Pop

In Chicago, July SRW prices added 14.25 cents to close the day at $5.215. The September 2018 contract added 14 cents to end the day at $5.385.

In Kansas City, July wheat prices added 14 cents to close the day at $5.405 per bushel. The September 2018 contract finished just a tick over $5.59 per bushel.

Markets continue to react to the lack of rain across the Southern Plains.

Yesterday’s USDA Crop Progress report showed that the winter wheat crop is catching up on heading. However, crop quality is still well below last year’s grade during the same period. As the chart below explains, just 36% of U.S. winter wheat is graded good-to-excellent. That’s eight percentage points behind the five-year average.

Soybean Exports

In Minneapolis, spring wheat prices added 11.25 cents to close the day at $6.33. The September contract added 10.25 cents to end the day just under $6.39 per bushel.

Yesterday’s crop progress report showed that farmers have been catching up in states like Minnesota, South Dakota, and North Dakota. U.S. farmers have completed 79% of spring wheat planting, which is just a point back of the five-year average.

US Winter Wheat Crop Condition

Soybean Prices Press Higher

Ongoing optimism over Chinese trade pushed soybean prices higher on Tuesday. The July soybean contract added 5.25 cents to close the day at $10.305. The August contract added 5.25 cents to end the day at $10.3425.

The words of the day are “cautious optimism” around the soybean trade. Translation: There isn’t going to be a trade war, and people need to accept that. There is simply too much money at stake, and while it’s a heck of a headline… it’s just not reality.

Despite biblical rains on Monday in Chicago, dryness is expected to hit the Midwest over the next week. Yesterday’s crop progress report indicated that farmers have caught up on planting across the country. The 56% completion rate is well above the five-year average as noted in the chart below.

US Soybean Planting Progress

Meanwhile, on the global front, a strike among truckers in Brazil is creating a string of logistical challenges for soybean buyers.

Corn Prices Tick Higher

The July corn contract added 2 cents in Chicago, while the September contract added 2.25 cents. July corn is trading just under $4.05, while the September contract is sitting at $4.135.

As noted in soybeans, dry weather is expected to persist throughout the Corn Belt this week.

Yesterday’s progress report indicated that farmers have largely caught up to the 5-year average.

Iowa, however, is lagging the average pace by 2%. Farmers have planted 81% of the corn crop, which is the figure we were eyeing over the weekend. Farmers in Illinois are 96% done with corn planting.

US Corn Planting Progress

This figure is important because we are not expecting any significant shift in yields until we start to see weather reports for the hotter months of the calendar.

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About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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