Bearish grain markets not helped by USDA

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Soybeans

Last week, I speculated that the bounce we were seeing might finally be the bottom on prices. Then again, it could just be a short recovery. A week later, it looks like it was a short recovery!

Grain traders used somewhat bearish U.S. Department of Agriculture reports May 12 and continued fast planting by Midwest farmers to justify a return near the lows for corn and a new low for soybean contracts May 12.

July corn futures had made a low May 2 of $5.78 1/4, crashing through the magic $6 level. After trading as high as $6 again May 8 and gaining 12 cents over last week, we found a new low at $5.80 3/4 May 11, just two cents off the previous low.

We recovered slightly to trade at almost $5.90 here as this was being written at midnight May 16.

December corn futures lost 26 cents last week, and the May 9th low of $5.16 1/4 held. We were most recently trading at $5.15 3/4, up fractionally. We have also gained back the losses of the days after the USDA reports.

July soybeans lost 46 cents last week and actually made new lows, at $13.88 1/2 May 12, after the USDA reports. We closed the day with a 15 1/2 cent loss. We recovered the evening of May 15 to a current $13.99 1/2.

We see similar changes in November soybean futures. The low came May 12 at $12.21 3/4. That compares with $14.27 3/4 for a high the last day of trading in 2022. November futures lost 56 cents last week.

By the numbers

The fundamental reasons for this price action we can dig out of the USDA numbers. Uncle Sugar cut the old crop export number by 75 mbu, which raised the 2023-2024 carryout to 2.222 billion bushels. That would be, if realized, the second-largest in recent history (since CCC storage days of the 80s), and not good for prices.

The USDA is looking for a yield average of 180 bpa, so with the assumed acres, we would produce over 15 billion bushels of corn to add to what we carry in. To add to the pain, exports have slowed, and it seems we are unlikely to meet the USDA estimates.

The standout number to me from the soybean portion of the USDA reports was the 2023-2024 carryout estimate that is now 334 mbu. That is not a lot, but it is the largest in four years.

It is small enough that some growing problems could change the market quickly, maybe in June, maybe in August if we had a late dry period. Our exports are poor right now, but it is that time of year.

Progress report

The USDA Crop Progress report out May 15 also did not help matters. We still are ahead of the average planting pace of 59%, hitting 65% for the country this week.

Ohio lags the total, but is not far behind the average. Ohio farmers have planted 26% of the corn, up from just 11% last week, but behind the 34% average.

Remember, the benchmark for not getting a cut in yield is to have 75% planted by May 15, so we have missed that by 10%, but probably have already caught up to the average as this is read.

The soybean planting pace is a similar matter, except that the trend to earlier planting has us well ahead of history and helping the yield/hurting the price.

Ohio had 28% of the soybean acres planted by the May 14th date of the estimate. The average was just 23% for Ohio, and we gained 12% last week. U.S. farmers had 49% of the soybeans in, up from 35%, and well ahead of the 36% five-year average.

It should be mentioned that part of the mental adjustment to corn that is below $6 and soybeans that are headed below $14 on some days is that we have had large inverses in the futures prices.

That is, May futures were well above the July futures for corn and soybeans, so the futures prices seem rotten as we switch our cash basis from May to July futures. It helps that basis is high over the July futures, but this will work out of the market, reminding us why we sell early in inverted markets.

Wheat

This week, the talk in commodities has been about wheat more than usual. That is because the reality of a very poor Hard Red Winter crop traded on the Kansas City market and the very good Soft Red Winter crop traded in Chicago are forcing futures contract for those exchanges to have a record spread.

Kansas City is now trading about $2.30 above Chicago. The hard, bread wheat will pull up our cookie wheat a little, but the prices will not be the same since the cookie wheat cannot be substituted for the bread wheat.

Wheat has finally rallied in Kansas City, with a gain of 44 cents last week. At the same time, Chicago lost 25 cents. Remember, though, the wheat harvest has started in southern Texas, and as it moves north, we may get some rallies out of this, but mostly in the hard wheat markets.

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