This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Row crop markets continue to find significant strength led by beans. We know from the commitment of traders report that comes out every friday that the funds had started buying back the big short position as of last Tuesday and we can assume they have continued. The spark that has the market’s attention is the rain in Southern Brazil. Most of the country is completely done with soybean harvest. But the southern growing regions still had about half their crops in the field and they have faced devastating rains which are forecast to continue. That growing region accounts for approximately 20% of Brazilian production and they are approximately halfway through harvest so we are talking about 10% of total Brazilian production that is at risk. The estimates of the damage are in the 2 to 5 million metric ton range (73 to 183 million bushels). It does not sound like much when you say only 10% of the crop is threatened, but that could be the whole US carryout. Argentine crop estimates are shrinking as well and that is adding to the bullish sentiment.
In addition to the issues now popping up in South America, the wet weather pattern in the US has slowed our planting down too. USDA reported corn planting progress at 36% this week compared to 39% expected, 27% last week, 42% last year and 39% average. Soybean planting was estimated at 25% compared to 28% expected, 18% last week, 30% last year and 21% on average. After a very dry fall and winter, a lot of field work had been done to enable a very fast planting pace. We started off ahead of average but are now falling back to near average and based on the forecast will probably fall a bit behind. I have mixed feelings about what this means for the market. On one hand, early planting statistically means better odds for an above average yield but the rally in the market may incentivize more corn acres. We need to be at or below 90 million to have a decent chance for a rally.
Beans have been the leader so far this week but wheat is finding some of its own strength as well. The dryness in Russia continues to reduce crop estimates. The rains that were forecast for the US Plains to help that crop were disappointing. Also the SRW wheat crop in the east is quickly approaching more rain than is beneficial and it was the soft wheat crop that is holding the US crop ratings up.
USDA will give us their updated supply and demand forecasts this Friday, May 10th at noon. Until this weather spark, everyone had expected a very quiet market ahead of this report. This one can be a big market mover since it will be our first look at the new crop balance sheets. I will not have the numbers in my Friday morning report but will give you a summary of the expectations. Market will be positioning ahead of this report and watching South American and North American weather. At this point, I think beans have more upside potential from this than corn.