An array of factors has been tugging the grain markets this month.
First, planting is significantly behind schedule—especially for corn. As of May 5, 23% of the U.S. corn crop is planted, which compares to a five-year average of 46% planted by this date. Each of the major corn-growing states are behind. Illinois corn farmers are 56 percentage points behind the average pace, at only 10% planted. Farmers in Indiana are 30 percentage points behind average and farmers in Ohio are 25 percentage points behind. Farmers in South Dakota haven’t made any progress in planting.
In soybeans, only 6% of the nation’s crop is planted, which compares to a five-year average of 14% by this date. Farmers in Iowa, Kansas, Kentucky, Nebraska, North Carolina and Tennessee are close to average progress or slightly ahead.
While planting is behind, the headline grabber this week was when President Donald Trump tweeted on Sunday that tariffs on $200 billion of Chinese goods may be raised from 10% to 25% on Friday, as trade talks between the U.S. and China progress were going "too slowly." Markets around the world crashed following the tweet.
Now, we’re on the eve of what is traditionally another big market mover: USDA’s May edition of the Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports.
“Typically, the May WASDE report is one of the biggest USDA reports of the year,” says Ted Seifried, chief market strategist and vice president with Zaner Ag Hedge Group. “This report essentially sets the baseline from which the USDA will be working from for the rest of the new marketing year.”
Granted, the balance sheet almost always looks different by the end of the year, Seifried notes. But the report provides a starting point and clues as to what changes USDA will make in the future.
The pre-report trade estimates for crop production include:
- Corn: 14.841 billion bu., with an average yield of 175.3 bu./acre
- Soybean: 4.1985 billion bu., with an average yield of 49.8 bu./acre
- Wheat: 1.910 billion bu., of which 1.277 billion bu. will be winter wheat
Will the Bulls or Bears Rule?
“Traders are looking for bearish news,” says Joe Vaclavik, founder and president of Standard Grain. “We should see reduced old-crop demand estimates for corn and soybeans and larger carryout estimates, as a result.”
The general attitude, Vaclavik says, is that the burdensome supply situation for corn, soybeans and wheat will continue through the 2019-20 marketing year.
“If you look at some of the pre-report carryout estimates for 2019-20, they're very similar or higher to those big posted for 2018-19,” he says. “This of course assumes a fairly normal production situation in terms of yield.”
The pre-report trade estimates for ending stocks include:
- Corn: 2.058 billion bu. (2018/19) and 2.132 billion bu. (2019/20)
- Soybeans: 923 million bu. (2018/19) and 925 million (2019/20)
- Wheat: 1.096 billion bu. (2018/19) and 1.060 billion bu. (2019/2020)
“The trade should take the 2019-20 numbers with a grain of salt,” Vaclavik says. “I think they should be more interested in revisions to old-crop demand numbers and overseas crop estimates. There will be a lot of attention paid and they report tomorrow morning.”
Will tomorrow’s report hold up to its reputation of being a key point in the marketing year? We’ll have to wait and see.
“Right now, the corn and soybean markets seem to be more fixated on the condition of the trade deal with China than anything else,” Seifried says.
Visit AgWeb.com on Friday, May 10 for complete coverage of USDA’s reports, which will be released at 11 a.m. CDT.
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