It was another volatile week in the markets. After CME soybean prices saw consecutive days of falling prices, the market rebounded Thursday and Friday.
“There had been a pretty large spec position of long corn/short beans and long wheat/short beans,” says Chip Nellinger of Blue-Reef Agri Marketing. “There were some rumors and some talk floating around in the middle week about Russia potentially allowing Ukraine to export some grain out of the Black Sea area for humanitarian purposes. That was enough to cause some profit taking and some unwinding of that spread,”
Nellinger says soybeans are also likely trying to buy acres to meet demand.
“Basis levels in Brazil have been slowly rising, and that means they don’t have a lot of exportable supplies left,” he says. “We don’t have a lot domestically, and in a lot of areas basis is $1 over. We’re kind of in the dog days of summer, where we’re going to have to really scrounge around to find some remaining supplies until we get some new crop supplies of soybeans. I think the action of corn and wheat tell you commercials and end users are willing buyers on the break.”
Nellinger points out the market didn’t have a waterfall sell-off, with traders buying the breaks.
“So, I think we’re on a good footing across the board, quite honestly, in spite of a lot of volatility,” he adds.
1 Million Acres of Prevent Plant in Northern Corn Belt?
More favorable forecasts in the Northern Corn Belt also pressured prices mid-week. The latest USDA Crop Progress report showed U.S. corn planting made major gains with 72% of the crop planted as of last week, up from 49% complete on May 15.
North Dakota is the furthest behind, with only 20% planted versus a five-year average of 46% by late May. Minnesota is 60% planted, which compares to a five-year average of 86%. Farmers were able to get in the field in areas of North Dakota and Minnesota this week, but the states still have a long way to go.
“I think everyone is going to be looking at Tuesday’s Crop Progress report, which is delayed a day because of the holiday, to see how much got accomplished,” says Arlan Suderman of StoneX Group. “It’s really focused on northwestern Minnesota and northeastern North Dakota, where we’re going to have the big problems around the Red River Valley. We’re going to struggle to get spring wheat, corn and soybeans planted.”
The crop insurance deadline is already up for corn and approaching quickly for soybeans, so Suderman says there could be more than prevent plant that currently penciled in.
“I think we’re going to probably lose 900,000 to maybe 1 million acres of corn in that region overall, maybe as high as that on spring wheat, as well,” says Suderman.
Possible Market Surprise
As the summer weather market takes hold, Nellinger says fireworks may be ahead. The top of the commodity markets may not be in.
“We haven’t really had a good old-fashioned scare,” says Nellinger. “We typically have a price break in mid- to late-May, assuming we have good planting conditions and things that go into the ground. The markets perceive that the crop is in the ground and everything’s great. We’re getting rain and that’s true in areas where the crop is in and up and growing, it couldn’t be almost a more ideal conditions, but there’s still crop left to plant.”
Higher Highs?
Nellinger says even if the top of the market proves to be in, he thinks prices will retest some of the recent highs.
“We are supremely tight on things, and I would be very shocked if Ukraine does export anything,” he says. “Any little threat at all 10 days of hot dry weather in the western Corn Belt at all, and this corn market could explode higher on uncertain yield potential.”
