Rain Rain Go Away
Planting progress was at 75% across the nation in Monday’s report (Figure 1). This is up from 55% last week and 55% last year. Trade is worried about planting progress slowing this week as rains continue to drift across the corn belt. There is talk of decisions being made to switch to beans because corn planting is not possible in some areas. Informa reduced estimated corn planting acres and increased soybean acres.
Corn Planting Progress 5/11/15
El Nino is expected to be favorable this year resulting in a cooler, wetter summer. Historically, corn yields tend to be higher in an El Nino and prices tend to drop for the first few months only to recover slightly, then drop sharply again going into harvest.
Overall the corn market looks bearish. The avian flu H5N8 continues to thrive with the number of poultry affected now exceeding 30.73 million birds. Feed usage will be impacted but the extent of the impact is not known. China and Mexico have made announcements that good corn production will cause them to reduce imports into each of their respective countries. There are plentiful old stocks we are carrying in from last year and there looks to be a good corn harvest this next year due to a favorable El Nino.
Wheat condition was at 44% in Monday’s crop condition report which is up 1% from last week and 14% from last year (Figure 2). However there was concern later in the weak of condition dropping due to rain.
Figure 2: Wheat Condition Report
Wheat saw a rally of $0.34 on Thursday in response to an increase in demand, weather scares, and short covering. Thursday morning started with several countries buying about 400 thousand tons of wheat, then there was talk of rains in Texas and Oklahoma having negative impacts on harvest and protein levels. Once the rally started, funds started covering shorts and prices rallied well above resistance levels
Wheat is a more global crop so impacts from El Nino are different than corn. Prices rise during the first 3 months of El Nino due to drought conditions severely hurting Australia’s yields.
Overall the wheat market also looks bearish. There is plenty of wheat in the world and the value of the US Dollar is higher relative to many other currencies which reduces the demand for US wheat and pushes prices down. Russia dropped their export tax today and trade is estimating another 1 million metric tons will hit the market as a result.
Marketing outlook meetings in Gordon, Hay Springs, and Hemingford this week went well. Prices are well below costs of production for both wheat and corn and there is concern that it will be very hard to produce at a profit this year. Producers may be ahead to diversify and produce other crops.
I would just like to remind everyone that calculating break evens is even more important this year and it is not always beneficial to cut back on inputs. Cost per bushel decreases when more bushel are produced so improving your efficiency by applying larger amounts of some inputs could be beneficial.
I would also like to point out the availability of some contracts and marketing opportunities to help get you at or above your break evens. Some contracts allow the producer to put a “floor” in so that they will not receive a lower price than the floor. The recent 34 cent rally in wheat would easily pay for some price protection. Other opportunities provide a premium in exchange for a firm offer on next year’s crops. For more information on what is available, or if you would like to discuss break evens, contact me (Tucker) at my office (308-487-3325) or my cell (308-360-0830). I would also be happy to schedule a visit.