The final planting report for corn was released on Monday reporting an overall planting progress at 94% with Kansas, Nebraska, and Texas lagging in planting at a normal pace of 1.5 million acres. If you add the lack in progress in Iowa, the Dakotas, Minnesota, Wisconsin, and Kentucky due to passage of insurance prevent plant dates, the unplanted acreage number increases to 2.7 million acres. A reduction in acres does not mean a reduction in production however with an increase of 2 bushels per acre offsetting the reduction in acreage.
The overall price trend is still bearish with 1.8 billion bushel of old crop carryin along with good conditions being forecasted for this coming year’s crop. The only chances for short term rallies are short covering by funds.
Wheat saw a good rally at the beginning of the weak as trade worried about some frost damage and dryness in Canada and increasing dryness in Russia. This spurred the start of a fund short covering rally that continued into Tuesday where a sharp drop in the US dollar spurred further price increase. Wednesdays highs prompted selling as producers that needed to move old crop to make room for new start to realize that prices may not reach $6.00 again before wheat harvest. Those highs were lost however after the Informa production estimates came out, estimating that US winter wheat production would be 9 million bushel more than the USDA’s May estimate. Wednesday was also day 3 of fund short covering and historical trends tell us that short covering rallies generally only last 3 days. Funds are still short 154,000 contracts after covering 11,000 shorts on Tuesday.
The new Russian export tax is now in place and is tied to the value of the Russian Ruble. If the Ruble devalues, the export tax increases. Trade is concerned about persistent dryness in Russia, Canada, Australia, and some European Union areas negatively impacting those regions’ wheat production. Overall, trade is playing a weather game and any small fundamental change could spur a short covering rally.