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Plenty to ponder as planting progresses

By Doug Tenney, Leist Mercantile

Fieldwork for much of Ohio finally returned the second week of April. Producers were aggressively applying fertilizer and spraying herbicides for corn and soybeans. In addition, repairing dreaded tile blowouts as well as installing new tile were in the mix of work being completed. Corn and soybean planting was taking place in very small amounts as evidenced by the April 9 weekly Crop Progress Report as it detailed planting progress across the country. This report had U.S. corn planted at just 2%, matching the five-year average. To no surprise, this report had zero corn planted in Iowa, Nebraska, Illinois, Indiana, Minnesota, and South Dakota. The European and American weather models were in huge disagreement in their weather forecasts for the last half of April. The American model indicates a warmer and drier outlook. In sharp contrast, the European model has showers continuing for that timeframe for the Delta, central Midwest, and eastern Midwest. It also indicates rainfall amounts for areas of the Midwest could reach 200% of normal.

Corn and soybean weekly export sales the second week of April were disappointing and below trade expectations. Corn sales were 21.5 million bushels, just above those of the previous week. However, soybean sales were just 9.9 million bushels, down 86% from the previous week. The April 9 Supply and Demand Report cut U.S. wheat exports 20 million bushels. Egypt — traditionally an active buyer of U.S. wheat — passed on our wheat as it was sourced elsewhere. The same report also reduced corn demand in three lines, with corn fed to livestock reduced 75 million bushels to 5.3 billion bushels, corn exports were cut 75 million bushels to 2.3 billion bushels, while corn used for ethanol was cut 50 million bushels to 5.5 billion bushels.

The May 10 Supply and Demand report will include numerous changes. Specifically, price range forecasts will be eliminated and replaced with single price points for all crops and livestock, international crop tables  will include an aggregate value for “World less China,” countries, and lists of major importers/exporters will be updated to eliminate outdated aggregations such as “Former Soviet Union,” to better reflect current trade patterns according to the USDA website.

The April 12 Commitment of Traders Report had managed money short 71,000 contracts of soybeans as traders continued their months long pattern of being short corn, soybeans, and wheat. They were short 272,000 contracts of corn, a new record. The big shorts continue to flaunt they have no reason yet to exit their huge short positions in corn, in spite of what appears to be less than excellent planting conditions as weather across much of the Midwest looks to see less than ideal amounts of corn getting planted the last two weeks of April. Typically managed money has not been short the grains during the spring timeframe.

There continues to be promise that China could be buying quite a bit of U.S. corn the next few years if a U.S./China trade deal ever gets done. As of mid-April there is still no sign of a completed trade deal in spite of being weeks past a March 1 deadline announced months earlier by President Trump. U.S. Treasury Secretary Steven Mnuchin as of mid-April continues to report good progress being made in the ongoing trade talks between the U.S. and China. We can only hope a final agreement is one fantastic deal for U.S. agriculture. If it is not, it will only add to the sharply bearish sentiment, which seems to permeate the landscape today for grains.

A mid-April snowstorm in the upper Midwest provides yet another huge weather event following the March snowstorm and heavy rains which flooded portions of Nebraska, Missouri, and Iowa. Late March satellite images indicated at least one million acres still under water out west. Those factors along with April rainfalls strongly suggest U.S. corn acres could decrease while soybean acres could increase. A much better handle on actual plantings should be seen by June 1.

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