Have you been synergized?

Published on: 14:03PM Apr 25, 2017

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We are witnessing weakness across the grain and soy markets this morning and for corn and beans at least, it would appear to be little more than Monday/Tuesday unwind trade.  In the case of wheat though, we could not even sustain the strength on Monday and are once again pressing down against the new lows that were posted last week.  Note that this pressure is in face of the solid export inspections of 22.5 million that were reported yesterday and growing concerns about the weather conditions in Canada.  Snow continues to fall on the Canadian prairies, which in any given year could be a call for concern this late but compounding the issue this year is the fact the wet conditions last fall left a number of acres unharvested.  In Alberta alone, it is estimated there are between 1.2 and 1.5 million acres of wheat or canola that need to be harvested yet.  The concern now is if conditions do not improve soon, which is not in the forecast by the way, spring planting could turn into summer planting.

The lack of buying this morning can also be attributed to the decent planting progress that was made last week.  The USDA estimates that we have 17% of the intended corn acreage in the ground, which is still 11% behind last year but is only 1% behind average.  Illinois farmers made great strides as this state has 34% in the ground compared with an average of 28% and last year at 38% while Iowa is at the other end of the spectrum with just 8% planted compared with 14% average and 36% a year ago.  To round out the “I” states, Indiana was 10% planted versus an average 13% and if we throw in the big M, Minnesota, we find that they have only put 6% in the solid versus an average of 17% and last year’s pace of 40%.  While there is no guarantee that early planting assures big yields it normally does not hurt to get a jump on things.  The was the first week for bean reporting and the USDA projects that we have 6% of the acreage in the ground which is 3% above both the average and last year.  As you may have suspected, the majority of this is in the south.

The Brazilian bean harvest is estimated to have reached 93%, and solid yields have remained consistent.  Dr. Cordonnier has now raised his estimate another 1 MMT to 110 million, which compares with the USDA April estimate of 111.  He also bumped higher the overall corn estimate for that nation, raising it 2 MMT to 92 million.  The USDA currently has this number pegged at 93.5 MMT.  Harvest in Argentina is finally picking up a little steam and beans are estimated to be 16.3% complete, which is around the same pace as a year ago. Corn harvest is projected to be 22.6% complete.

A few weeks ago we reported that the soon to be new owners of Monsanto must have been pleased the quarterly reports issued by that company and it would appear that Dupont is now publishing similar news.  The Ag division of the company reports earnings of $1.24 billion for the first quarter, up 12%, attributed to increase seed sales.  In case you forget, seeing that is has drug (no pun intended) on for over a year and a half, but Dupont in in the process of merging with Dow, which they now expect to be completed by August/September of this year.  I am always amused by the soft verbiage that is used by corporate types when such a deal is being proposed and structured.  The CEO of Dupont stated that once the merger is complete, they will “quickly begin working on the 500-plus projected projects already identified to deliver the targeted $3 billion in cost synergies.”  I guess this means that departments or people will not be eliminated but rather “synergized.”  That sounds so much more positive and palatable.