Weather will once again dominate grain markets for the next three months. The U.S. Climate Prediction Center is not currently seeing an active El Niño or La Niña. It is extremely important to monitor for that activity. The Center does see increasing odds for an El Niño in the Northern Hemisphere by late summer or fall. It’s arrival will be crucial for summer weather conditions. Other meteorologists suggest that if El Niño begins after early August, summer weather patterns could be hot and dry. Typically the El Niño pattern is not bad for crop production if present during the summer in the U.S.
Corn and soybean planting is the main focus for producers across Ohio and the Midwest for the next three weeks. As of the second week of April, U.S. corn planting progress was 3%, the same as the five year average. Days before the Easter holiday, producers across parts but not all of Ohio were just beginning field preparations to plant corn and soybeans. Field activity was not yet at a fast and furious pace at that time. Mid-April Ohio weather forecasts have above normal precipitation into the end of April.
Weather has not been a huge factor in Brazil or Argentina as compared to previous years. Lacking this year were the long periods of hot weather in Brazil along with prolonged rainy periods in Argentina. Missing are the concerns of reduced soybean production in Brazil and Argentina due to weather. Also missing are the huge soybean loading delays, which reached nearly 60 days at the ports in Brazil. Those delays were long enough to shift loadings from the U.S., pushing our soybean exports higher than expected.
The supply and demand report increased ending stocks for soybeans and wheat. Soybean ending stocks were increased 15 million bushels while wheat ending stocks increased 30 million bushels. The March 31 quarterly stocks report estimated soybean stocks higher than traders had expected. With soybean demand consisting largely of exports and crush, usage can be readily observed with weekly export reports or monthly soybean crush reports. The reality of higher than expected soybean stocks reveals a trend that will gather steam in coming months —2016 U.S. soybean production was under-reported with previous reports. Any corrections will take place with the October Supply and Demand Report which will follow the Sept. 29 Quarterly Grain Stocks Report. Meanwhile, the residual column will change to reflect the expected higher production.
The mid-April period brought two things to watch. First, South America soybean producers reduced their selling to a near crawl. It was the same selling pace seen in February when reports of the Brazilian Real moving unfavorably brought news of producers in Brazil storing, not selling soybeans. It did not affect or reduce the loading of soybean boats in Brazil during February and March. Second, the Commitment of Traders Report brought an uncommon occurrence heading into the spring planting season: managed money grain positions short in the grains. Funds have been reducing their long soybean positions for over six weeks as they grew tired of the price decline of nearly $1.40 from February into April. The price decline was not healthy to their bottom line. Mid-April managed money held short positions in soybeans of 24,000 contracts. Weeks earlier they had been long over 150,000 contracts of soybeans. The report had the same traders short 143,000 contracts of corn and short 138,000 contracts of wheat. While those traders had been short corn for weeks and short wheat for many months, the report revealed they were adding to their short positions in both corn and wheat. Corn prices were higher for several days mid-April. It had been thought with that price rally that it had been a rally of funds reducing or buying back their short positions. That was not the case. Those funds continue to believe and position themselves for lower prices for corn, soybeans, and wheat which they feel are destined to come to reality as the planting and growing seasons progress in the months ahead.