Extremely wet weather across the entire Corn Belt has led farmers to anxiously wait until their fields are dry to complete spring field work and planting. Increased moisture has affected more than just planting; prices of corn skyrocketed at the end of April due to the delayed planting of what is suppose to be one of the largest crops planted in over 75 years. Water levels in key transportation rivers are alarmingly high and have caused the Coast Guard to temporarily close large sections on the Mississippi and Illinois Rivers.
As highlighted above, corn planting progress is greatly lagging from years past. Only 5% of the corn crop has been planted compared to 49% last year and the five year average of 31%. The top corn producing states have fared even worse.
The weather outlook for the next few days looks unforgiving as the Midwest will see moderate to heavy rains, especially in the top two corn producing states of Iowa and Illinois. Illinois has endured double its normal rainfall over the past three weeks. With continued cold and wet weather, an increase in planted acreage is unlikely for next week's Crop Progress report. Carsten Fritsch, an analyst at Commerzbank AG, commented "The very wet weather forecast for the next few days will also make it impossible to make any rapid progress in closing the gap. Meanwhile, we are nearing the critical point when the delays can no longer be caught up and crop shortfalls will become inevitable."
South American Port Delays
The line of trucks waiting to unload oilseeds in Brazilian ports had tripled in size in late April due an abnormal increase in export demand for soybeans. The increase in demand stems from Brazil producing what could possibly be its biggest soybean crop ever. Truck lines spanned as long as 21.1 miles at the Port of Santos, according to Ecovias. The queue of ships has steadily been over 200 waiting to load soybeans throughout April.
The majority of grain is hauled via trucks in Brazil and many trucks were being diverted to alternative ports and terminals hundreds of miles further south to bypass delays. These delays cost a fortune to the producers who have to wait or travel a long way to dump the grain.
Brazil's inefficient infrastructure is causing large importers like China to cancel large orders of soybeans. Last month the Chinese trading firm Sunrise cancelled nearly 2 million metric tons of soybeans and another undisclosed firm canceled shipments this month. Brazil's government has decided to allow ports to work 24 hours a day, in order to relieve the backups at major ports.
Corn prices were weak for most of the month but rallied at the end resulting in a decrease of 1.7% this month, closing at $6.83 per bushel on the front month contract. The first trading day of the month had carried over downside pressure from the late March USDA Quarterly Stocks Report. The USDA increased U.S. ending corn stocks to 757 million bushels in the April WASDE Report. Additionally, the USDA projected a 25 million bushel decrease in corn exports in the U.S. due to slow pace of shipments and expected competition from Brazil and Ukraine. Over the past seven months, analysts have felt the least bullish on corn prices, according to CHS Hedging, due to the anticipation of a record corn crop to be planted in time. If continued wet weather causes more delays in planting you will see a shift in attitude from bearish to bullish.
Soybean prices increased by 4.5% this month to close at $14.67 per bushel. Commercial and fund buyers helped support prices prior to the WASDE Report. USDA did not change the U.S. ending soybean stocks from 125 million bushels for the second straight month. Concern still lingers of a delayed U.S. corn planting season which will drag into the soybean planting season.
Wheat prices increased by 4.9% this month, closing at $7.21 per bushel. The USDA estimated U.S. wheat ending stocks 15 million bushels higher this month due to increased domestic seed usage. The condition of the U.S. winter wheat crop is very poor as exceptionally cold and dry weather caused frost damage in the Southern Plains. Tight global supplies and a weaker U.S. Dollar also helped support wheat prices.
The Creighton University farmland price index dropped slightly from 67.2 in March to 66.9 in April but has been above growth neutral for a staggering 41 consecutive months. However, there are some negative results from the growth, "Increased agriculture land prices and rent cost are hurting our smaller operators as well as younger, beginning farmers," said David Callies, CEO of Miner County Bank in Howard, SD.
Bankers were asked this month in the survey what percentage of farmland transactions were purchased by nonfarm investors and what proportion of sales were purchased with cash. Only 19.8% of farmland transactions were purchased by nonfarm investors. Cash transactions made up 28.6% of farmland purchases.
The late start to the planting season should not cause great concern unless wet weather conditions persist into mid to late May. Warmer temperatures, sun, and wind will help dry fields out quickly. We will be closely monitoring planting progress in May, along with any and all implications derived from river closings due to flood conditions in the Corn Belt.