Brooks Schaffer Market Report for Tuesday May 21

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

Monday saw wheat trade sharply higher closing up 37 cents gaining back much of what was lost last week. This bounce was in spite of higher than expected Kansas wheat tour results and beneficial rains over the weekend in much of Kansas. Strength in the wheat was led by the news out of Russia. Many analysts continue to lower their estimates of production after the long period of dryness and multiple freeze events. In Ukraine, much of the region that was hit by the frost is also where the fighting is most fierce calling into question how much can be replanted. There are also continued rumors about how much India is going to import this year. There are private estimates of India’s imports between 73 million to 257 million bushels, while USDA only has them at 11 million. Between production issues in Russia and Ukraine and more demand from India, this could dramatically change the world balance sheet picture. This is why the market is reacting with so much volatility. US does not have a major threat to production, the volatility is from the world market. The low prices we have seen for the last two years was not from excess stocks all over the world, but mostly because Ukraine and Russia were exporting as much as they could as cheap as they could to generate hard currency. 

Corn was pulled by the strength in wheat but also rallied on the rains coming back to the Midwest to stop planting again. They made dramatic progress over the few day window they got to plant. USDA’s planting progress update monday at 4pm estimated the crop was 70% planted, compared to 68% expected, 49% last week, 81% last year and 75% five year average. With more rain coming this week we are rapidly approaching the June 5th crop insurance deadline for corn planting in the Eastern Corn belt. Iowa and most of Wisconsin’s deadline is even earlier at May 31st and the rest of the Western corn belt is May 25th. The last time we had late planting, 2019, the corn market was rallying the whole spring so many farmers elected to plant corn even after the crop insurance date. This year, we are not seeing the same strength in the board to encourage late planting. This will help the corn market in the long run as there is more incentive to take the prevent plant payment rather than risking a late planted crop with less insurance coverage. 

Nutrien caused a stir last week when they predicted that corn acreage may be 3 million acres below what we saw on the March planting intentions report. That prediction was 90 million acres of corn intended and at 90 million and USDA’s yield estimate of 181 we do not add much back to the balance sheet at the end of the marketing year. If we take 3 million acres out at 181 bushels per acre, that drops production by 543 million bushels! That would dramatically change the balance sheet. The market is going to need more evidence of this before it actually starts to price it in, but it is at least something positive that could happen. It is a welcome change from this winter when it felt like nothing could save the market. 

Soybean planting was estimated at 52% complete compared to expectations of 49%, 39% last week, 66% last year and five year average of 52%. Beans found strength this week from the continued flooding in Southern Brazil. There is varying estimates of how much production has been lost in the field and they are also facing production losses in storage from flooding. Additionally there are crush plants that are shuttered due to the conditions too.