I sometimes joke that we need to rush to get planting done just so there is enough time to do it again. That was the case this year where we planted soybeans ahead of corn. It has worked in the past but unfortunately not this year.
An early May frost came through and singed the beans in parts of Northwest Iowa. Enough so that we replanted up to 70% of those acres. One of our brokers in Missouri spent much of last weekend replanting beans from too much rain. Now we are quickly accumulating stress degree days as temperatures reach nearly 100. It is amazing how we can go from frost risk to sweltering heat damage in such a short amount of time.
Next crop threat: weather
The war in the Ukraine has garnered most of the trader focus in the last several months. All signs indicate this will be a prolonged conflict with no quick fix. The bull market needs to be fed and so it is looking for the next crop threat. This might come in the form of extreme heat and dryness.
The 90-day SOI is forecasting a strong La Nina through fall. My ag climatology professor from ISU always taught that there was 70% chance of below trendline yields in a La Nina year. Furthermore, when stress degree growing days begin to accumulate to the point where they exceed 140, that is where the corn yield potential begins to deteriorate. Another nuance to this is how cool the nights are. Corn may be able to withstand hot days as long as the nights are cooler. The last couple of days have seen evening temperatures in the 80’s. That will not be good as pollination prefers cooler temperatures as it usually takes place in the morning.
Basis appears to be strengthening in many areas. In parts of Kansas, one feedlot was offering $2.35 over July and was reportedly having a tough time finding grain.
Many farmers are sold out of old crop while at the same time limiting new crop sales until they can get a better handle on what their production is going to be. One producer was unwilling to commit to any further sales as they were concerned they were going to be able to deliver what was already contracted.
What’s left in the bin
Now is the time of year when we get to see just how much corn the elevators/coops really have. They have already worked through the easily acquired bushels from harvest 8 months ago. Now they will have to work harder to shake loose those remaining bushels if they are going to make it to the next harvest.
I was told one coop was telling farmers that there was no reason to store grain beyond July and that they might as well get it sold now. I translate that to mean they are going to run out of grain in July and really need to buy more.
The trade will lean bullish as we approach the quarterly stocks and acreage report at the end of this month. Global ending stocks may appear somewhat misleading in that they don’t do anyone any good if they are locked up in Ukraine, unable to export. The 20 MMT of grain sitting in Ukrainian storage is only going to get worse as the current growing crop is a few months from harvest and there is no place for it to go.
Back home, Prevent Plant acres in North Dakota and Minnesota are going to put pressure on USDA to reduce acres. To avoid food inflation, government agencies usually like to find something to offset lower yields, and increasing acres usually does the job. That would have worked in the past but there really isn’t anything for them to increase.
We have maxed out our acres here at home. The acreage report could provide fireworks for the markets a few days ahead of Independence Day!
Matthew Kruse is President of Commstock Investments. Subscribe to their newsletter at www.commstock.com.
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