By Doug Tenney, Leist Mercantile
USDA with its weekly crop progress report on May 29 put the U.S. corn planting at 92%. Huge amounts of corn were planted during the first three weeks of May, though northwest Ohio struggled severely to plant corn and soybeans timely this spring. Heavy rains fell throughout much of May causing significant delay in planting until the last few days of May. The May 29 report revealed Ohio had just 82% of its corn planted, leaving 621,000 acres yet to be done.
It is interesting to note that comments on the stock market at the end of May suggest that stock traders were growing weary, paying less attention to trade developments with China and other U.S. trading partners. Meanwhile, the opposite is taking place for grains, as traders seem to hang onto any and all news of China and its trade posture with the U.S. Producers want to be optimistic, yet aware the big price decline could be just moments away. One day, traders are ecstatic at finally seeing China eliminate tariffs on inbound U.S. soybeans, then within two days they are thinking China is not buying enough U.S. soybeans.
Expect that weather will easily dominate the news for the next six weeks. It would appear that extreme weather events are the current trend and not ending soon. Weather trends at times can be hard to recognize, much like not seeing the forest for the trees. Consider this spring. The Eastern Corn Belt in April ranked highly in history for its extreme cold temperatures. Yet, May for Ohio and the Midwest ranked second or third as the warmest ever. The U.S. is not the first to see huge weather extremes this year. Argentina had drought, extremely high daily temperatures, as well as prolonged excessive rains which reduced both corn and soybean production. Brazil had drought conditions, which reduced corn production. Brazil’s soybean production is record setting and is likely to get even bigger.
Producers across Ohio (except northwest Ohio) praised corn conditions with consistent outbursts such as, “Outstanding, best ever, fantastic, quickly emerged, picket fence, rows closing earlier than expected,” to name a few. Producers pushed themselves in May to complete nitrogen applications in spite of afternoon prolonged cloudbursts — which appeared out of nowhere — complicating battle plans outlined that same morning.
Dry conditions for wheat in the U.S. southern plains, Russia, Canada, and Australia during May pushed July CBOT soft red wheat to $5.54 on May 29. Price gains early that day failed to hold as July wheat ended the day six cents lower amid one of the biggest daily price ranges for all of 2018. Keep a strong eye on weather events in the U.S. southern plains this summer. If that area remains dry for months on end, that dry trend often moves into the U.S. Midwest. Drought monitor maps at the end of May raised concerns that dry areas in Iowa, Missouri, Illinois, and Indiana were larger than the previous month.
Grains this spring appear to be extremely sensitive to headlines as price activity during the night session has often been squashed during the day session. China is not going away soon. Trade rhetoric is excessive as each side, bullish and bearish, attempts to win the day, displaying they have the biggest and brightest belt buckle for all to see.
Trade issues continue to be an ongoing concern for grains, at times easily outweighing the weather. While China trade issues continue to grab the headlines now and in the past, there are other countries of concern. Months ago Congress imposed its own mid-May deadline to renegotiate the NAFTA treaty. That deadline has passed without resolution, a situation especially frustrating to grain traders. Producers across the country, especially those with grain, continue to seek lasting solutions on trade issues. They know that prolonged trade wars are not bullish. The U.S. has imposed tariffs on Mexico’s steel and aluminum. Those tariffs could affect U.S. corn exports with Mexico. Months ago headlines that Argentina was exploring its potential to export corn to Mexico seemed to be a longshot. Now, not so much.