This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
The USDA May Supply and Demand report can set the tone for the growing season as it is our first look at the whole new crop balance sheets. Just about all the numbers on Friday came out within the range of pre report expectations but those ranges were very wide and the numbers for corn and wheat were on the bullish side. USDA’s production estimates were very close to the trade expectations, the surprises were on the demand side of the balance sheet. USDA actually dropped old crop corn carryout 100 million bushels due to increased demand. That reduced the carryin to the new crop and they increased demand for new crop as well and so that carryout estimate came out on the lower end of expectations too. Wheat old crop and new crop carryout was on the lower end of expectations as well. Wheat also had the bullish momentum from the continued issues in Russia. They have been very dry hurting yield potential and then at the end of last week had widespread frost in several of the major production regions. Two regions declared a state of emergency due to the damage. On soybeans USDA left old crop carryout the same and came out just above the average trade guess for the new crop carryout. USDA projects growing carryouts in soybeans but did not account for the increased domestic crush we are seeing. Soybeans were pulled by corn and wheat on report day, did not have momentum of their own from the domestic side of the report.
USDA did reduce Brazilian estimates of corn and beans but are still well above almost all other analysts including CONAB (the Brazilian equivalent of USDA). USDA also dropped Argentina corn production but left their bean estimate unchanged. We will get updated Brazilian production estimates from CONAB this morning Tuesday May 13th. The CONAB estimate should include some of the lost production from the flooding in Southern Brazil. Many analysts estimate that Brazil could have lost up to 2.5 mmt (over 90 million bushels) of production from the flooding. We will see what CONAB thinks.
Commitment of traders report came out Friday after the close. It showed the funds have bought back a massive amount of their short positions. That has driven the bulk of the rally and has overcome some strong farmer selling. Wet weather delaying planting means the drought has been broken. If we get a window in the next couple weeks to get the crop planted, it is difficult to see the funds wanting to pile on the long side.
Planting progress released Monday afternoon estimated corn planting at 49% complete vs 49% expected, 36% last week, 60% last year and 54% on average. Soybean planting was estimated at 35% compared to 39% expected, 25% last week, 45% last year and 34% average. Cotton planting was 33% complete compared to 24% last week, 31% last year and 31% average.