Weekend weather turned out to be a disaster for many of the cattlemen across the northern plains who continue to fight the good fight. However, as warmer temperatures arrive (hopefully soon), one must take note of todays date, April 16th with the second crop progress report of the year due later today.
Holding a 5-year average planting pace of 7% for this week, todays Crop Progress does have the possibility of staying near par as the southern states have been able to make strides for getting this crop in. The greater question will be on planting progress in the next few weeks as the Corn Belt should be rolling and making planting gains of 10% or better in the coming weeks. As snowfall for the weekend is being measured in feet for some places, there certainly are producers now questioning the viability of getting corn planted on time without a major warm up.
This would make one think that corn should be sharply higher to start the week wrong or at least at the time of this writing. Soybeans, to my surprise, are the strength through the night session and early in the day session before joining the rest of the grains in the red. Rain makes Grain Does snow? Assuming Illinois, Indiana and Ohio face only a mild set back, that still leaves nearly 40% of the nations corn acreage in the Dakotas, Minnesota, Iowa, Wisconsin and Michigan and reports of snow fall nearing 2 feet!
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This begs to question why corn continues to struggle at these levels while soybeans appear willing to face any bearish news head-on. As threats of a trade war died off, the markets attention quickly shifted back to supply in South America. Even as Brazilian production estimates continue to grow, their growth has yet to outpace the damage sustained in Argentina now 17.0 MMT from their initial estimate with additional room to the downside as Rosario Board of Trade recently estimated production at 37.0 MMT. Supportive, yes, but is it supportive enough to justify current prices and an outlook that now points to even more soybean acres?
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I struggle to make that justification but my opinion doesnt count in the markets. The fact is soybeans have been very resilient to hold these price levels. Managed money has trimmed their positions so we cant point to them as the support and it isnt the 550 million bushels of estimated ending stocks in the US. One can always point to ever growing global demand and the fact that global supplies are more than 6.0 MMT below last years record, but is that enough? Soybeans have a reputation of price resiliency up until the point that market participants begin to think it wont go lower.
This resiliency should be noted when it comes to marketing but it shouldnt be the only factor. Weather markets often provide an unjustified bullish bias and following the South American issues, there is more weight on performance in the US. Its far too early to predict yield beyond the USDAs Outlook of 48.5 bushels per acre, it may be a fairly safe assumption to make that planted acreage will surpass the USDAs 88.982 million acres; likely at the expense of corn and spring wheat. Pushing ending stocks that much higher.
What was once appearing as a good planting season has quickly turned sour but it likely will come with a marketing bonus of volatility as we work to clear out old crop bushels and lock in new crop prices. Just as last years prices quickly fell in the heat of July, we must keep bullish sentiment in check and make sales accordingly.
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