We have a very busy week for news in the grain markets. We got planting progress and crop conditions Monday at 4 p.m. Today, we get USDA’s May Supply and Demand report. This will be the first look at the whole new-crop balance sheet. Congress is supposed to vote on standalone E-15 legislation this week. In addition to USDA’s updated world supply and demand estimates, we will get CONAB’s, the Brazilian equivalent of USDA, estimates as well. Trump will be going to China to meet with Chinese President Xi Jinping on Thursday and Friday, which could be a big market mover for the ag space too. Since China is 12 hours ahead of us, the grain markets should still be trading Friday when they make their final statements and Trump leaves.
Monday afternoon at 4 p.m., USDA released its latest crop progress and condition report. USDA estimated corn planting advanced to 57% complete from 38% last week. That is 2 points ahead of market expectations. That is a few points behind last year’s 59% but still ahead of the five-year average of 52%. On soybeans, USDA estimated the crop was 49% planted, advancing from 33% last week. That is very close to market expectations of 48% and is well ahead of last year’s 45% this week and also well ahead of the five-year average of 36%. USDA reported wheat conditions at an abysmal 28% good/excellent. That is below the analyst expectations of 32% and down 3 points from last week. The Kansas wheat tour will start next week and is expected to find a very poor crop.
Today, Tuesday, May 12, at noon Eastern, USDA will release its updated World Ag Supply and Demand Reports. The market is looking for very few changes to the old-crop balance sheets for corn, beans and wheat, just a bit higher in corn and a bit lower in beans and wheat. Old crop is typically not the surprise on this report, but it is USDA, so there is always a chance for a surprise. It is the new crop the market will really be looking more closely at. The market is expecting new-crop corn carryout to come in around 200 million bushels less than this year at 1.92 billion compared to the Ag Forum estimate of 1.84 billion. We are looking for bean carryout just a bit above this year at 355 million, which is the same number USDA printed at the Ag Outlook Forum. Without any known major weather issue yet, we expect USDA to use the acreage from the Prospective Planting report and the trend yields estimated at the Outlook Forum, which is 183 bushels on corn and 53 bushels on beans. USDA will also update wheat production estimates, South America estimates and world carryout numbers. There is a lot of data released on this report, but it is just a question of whether USDA makes changes to its previous estimates or not.
Congress has stripped E-15 out of more bills than I can count now, but we are told the House will be voting on it as a standalone bill this week. If finally passed, it will not be an immediate overnight change to ethanol demand, but it will add to demand in the long run as investments are made in the infrastructure. It will keep the ball moving in the right direction. It is still unforgivable to me that we lifted sanctions on Russian oil, helping Putin weeks ago to try to keep a lid on fuel prices, but we still have not increased the amount of ethanol in our gasoline like other countries have. The price of ethanol is cheaper than gas right now, so the more ethanol we can blend, the more it will help lower the cost of gas. At the very least, we need this E-15 legislation to pass this week.
Everyone will be watching Trump’s social media account very closely this week during the trip to China. Things are not going any better in Iran, but he cannot delay the trip again without losing face. Both Trump and Xi need a deal, but many argue the Iranian situation strengthens Xi’s hand to win concessions. The market will be looking for concrete commitments of ag commodities from China and hopefully some actual purchases made this week to seal the deal. A very positive joint statement with both Trump and Xi will be needed. If Trump gets back on the plane without a statement and starts tweeting, that will likely not be a good sign for the ag markets. The funds have built a very long position, and last week is a recent reminder how fast they can turn the tide. Monday, the White House announced a list of CEOs that will be going to China with Trump, and the CEO of Cargill was among those, so maybe that is a good sign.