Record levels of precipitation have been recorded across much of the U.S. Corn Belt delaying the planting season for the corn crop. As of Monday, April 25th, only 9% of the entire U.S. corn crop had been planted, compared to 46% in 2010 and the 5-year historical average of 23%. The weather outlook for the next few weeks should provide relief to wet areas and moisture to the dry wheat regions in the southern plains.
Corn prices increased by 8.8% this month and closed at $7.54 per bushel due to the poor planting reports by USDA. Corn for May delivery was up as much as 12% earlier in the month on the very wet and cold weather in the Midwest, but decreased foreign demand pressured prices. U.S. exports of corn fell 43% during the last week of April compared to the prior week, and 65% off of the 4-week running average due to high prices and concerns over increased supplies. In addition, reports of investment fund capital exiting the grain markets on speculation of unsustainable prices lead to a selloff in late April.
Soybean prices decreased by 1.3% in March, to $13.92 per bushel due to decreased demand both domestically and overseas. Soybeans are planted after the corn crop and weather concerns have not yet carried over into the soybean markets. Soybean prices have also followed the general trend in the grain markets throughout the month.
Wheat prices increased this month to $7.69 per bushel, a 0.8% increase. In early April, wheat prices were as high as $7.97 per bushel due to the bullish USDA Acreage Report released in late March, but improving weather and decreased demand have pressured wheat prices lower. Although the condition of the U.S. wheat crop is dreadful, wheat conditions have been improving in the FSU and EU. Global wheat prices may see a relief this summer as Russia’s export ban on wheat may be lifted as soon as July, according to recent reports.
The USDA’s April update of balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report did not carry any alarming information as corn and soybean ending stocks remained unchanged.
Corn used for ethanol was increased to a record 5 billion bushels of corn, but the increase was offset in feed and residual use domestically. The current stocks to use ratio sits at an extremely tight 5%, which equates to an 18 day supply of corn.
Reports of an increased soybean crop in Brazil lowered U.S. soybean exports by 10 million bushels, yet the average market price for soybeans for 2010/11 was increased by 35 cents by USDA. Wheat stocks fell by 4 million bushels due to the increase in wheat acreage planted, although analysts were expecting wheat stocks to increase.
Weather & Planting
An extremely wet and cold April has severely delayed corn planting in the Corn Belt. As of April 25th, only 9% of the U.S. corn crop has been planted compared to the 5-year historical average of 23%. Spring wheat planting has also been delayed as only 6% of the crop had been planted as of April 25th, compared to the 5-year historical average of 25%.
Dry weather has continued to deteriorate the condition of the winter wheat crop in the central and southern plains throughout April. As of April 25th, 40% of the crop was considered to be in poor, or very poor condition compared to only 6% last year. Only 35% of the winter wheat crop was classified to be in good or excellent condition while 69% was in 2010.
The La Nina weather pattern is greatly affecting the precipitation levels across the entire nation. In comparison, Wichita, Kansas has recorded only 1.45” of rain in April, which is 77% below the average for the month. Champaign, Illinois has received 6.90” of rain, 89% higher than the average for the month of April, according to The Weather Channel. Upwards of 112% of the normal rainfall has been recorded in Indianapolis, Indiana during the month as well.
Farmland prices continue to see record sales as the Rural Mainstreet farmland index remained above growth neutral for the 15th straight month. The farmland index increased to 77.6 from March’s 75.0 and well above last April’s 59.6. Bankers continue to expect strong farming conditions, but are concerned about rising crop expenses.
The typical farmland selling season extends from when crops are harvested in fall until the spring crop is planted. Farmland sales have been slowing down due the upcoming planting season, but high prices have been continuing to motivate potential sellers.
The weather has been the driving force behind the grain markets in April and has also been to blame for the poor planting season thus far. Besides the delay in actual planting caused by the wet weather in the Corn Belt, any spring field work has been pushed back as well. Fields are inaccessible when wet and the physical planting dates for some farmers could be even further delayed if spring tillage and fertilizer application has yet to be completed.
The weather forecast for the Corn Belt has begun to call for much drier weather that may relieve high crop prices and farmer concerns. We expect crop prices to follow weather patterns if the macroeconomic pressure remains unchanged.
Grain markets will focus their attention on the weekly USDA planting progress reports, weather conditions, and growth stages moving forward into May. Weather will continue to play an enormous role in the grain markets through the rest of the season as well.
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