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Image of grain bins with words Grain market week in review with Bryce Knorr and Ben Potter in white. Entire image has red tint.

Grain market week in review - May 24, 2019

Wet weather continues to slow corn and soybean planting progress, which gave the markets a boost to end the week.

Missed some market news this week? Here's what Bryce Knorr and Ben Potter have been writing about.

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Grain futures are higher, extending gains from last week’s planting rally. Soybeans joined the party overnight after Friday’s Commitment of Traders showed funds with a record bearish bet. Right now a rising tide is lifting all boats, even though farmers may be forced to switch ground to soybeans and trade friction with China shows no signs of easing.

Grain markets extended gains overnight after USDA reported record slow corn planting for the crucial mid-May window when yield potential begins to slip. Farmers face final planting deadlines for corn soon in most states, when crop insurance protection decreases. Taking prevent plant could be an option. But growers don’t know if those acres would qualify for tariff aid many will need to be profitable this year.

This week’s rally showed signs of running out of gas overnight as overbought markets took a breather with some position squaring possible into the Memorial Day weekend. A series of storms sweeping through the growing region should make corn planting difficult, amid reports of a $2 a bushel tariff compensation payment for soybeans that could drive more acres to that crop as farmers ponder their choices.

Wet fields and more rain in the forecast make a tough year for planting even tougher. Traders get a first-hand look at fields if they leave town over the Memorial Day weekend while farmers try to decide what to do with their planting plans. Grain markets are holding firm overnight even as Wall Street heads for a rocky open thanks to more heated rhetoric from China and anxiety over Brexit.

After trading USDA’s latest tariff aid package Thursday, markets returned their focus to weather overnight, and the results were much more positive for farmers. Prices rallied as the first of a string of storms headed towards Chicago that will keep the Mississippi River closed until June and likely mean growers abandon plans to plant some corn acres. Memorial Day is often a turning point for grain markets, prompting more position squaring today.

Feedback from the Field

Nearly a week of warmer and drier weather in many areas helped growers get into the field, but corn planting progress is expected to fall far short of the 85% benchmark traders view as normal for this time of year in this afternoon’s USDA Crop Progress Report. Farmers reporting Feedback from the Field noted progress, with some saying they are done with corn and moving on to soybeans. But many are far short of normal.

USDA reports

The latest weekly export inspection report from USDA, out Monday morning, shows some mediocre data for the week ending May 16, with corn, soybeans and wheat all trending lower from the prior week.

For the week ending May 16, USDA didn’t have a lot of good news for grain exports, with the exception of soybean sales. Even so, grain markets appeared to shrug off the latest report, handing out moderate gains to corn and wheat futures while soybean futures faded around 0.5% lower this morning.

USDA reported two grain sales this week. On Friday, Mexico bought corn and on Wednesday, unknown destinations bought soybeans.

Crop progress

April showers are supposed to bring May flowers, but this month has seen plenty of additional wet weather (with even more in the forecasts) – pushing spring planting progress well below normal. That was evident in the latest USDA crop progress report, out Monday afternoon. For corn, the agency estimates 49% of the crop has now been planted as of May 19. That’s a big jump from 30% the week prior but remains significantly behind 2018’s pace of 78% and a prior five-year average of 80%. Analysts expected USDA to report progress of 50%. Only nine of the top 18 production states have planted at least half of their corn crop so far this spring,

A cold, wet spring that caused record slow corn planting has the 2019 crop squarely behind the 8-ball. To recover lost potential, production must run the table with near-perfect conditions the rest of the growing season. Otherwise, a smaller crop could wipe out much of the surplus USDA forecasts for the coming year.

With yield potential dropping and final planting dates for full crop insurance coverage near, it’s decision time for farmers wondering what to do with their 2019 corn. Producers have three basic choices: Keep planting corn and hope for the best, switch fields to soybeans or another crop, or take prevent plant and earn a portion of their crop insurance coverage.

Market recaps

Grain futures are higher across the board this morning, getting a lift after the start of trading in Europe as traders ponder a wet forecast and a holiday weekend that sometimes marks a turning point for the market. After a regular close today, futures don’t start trading again until 7 p.m. CST Monday.

Wet weather continues to plague corn and soybean planting progress this spring, and with plenty more rain in the forecasts, grain markets handed out big gains Friday. Corn moved nearly 4% higher today, with soybean futures up around 1%. Wheat also saw some of the biggest gains today, with some contracts up more than 4% on a round of technical buying and spillover strength from corn.

Outlooks

Basis outlook - Traffic is moving again on most of the Mississippi River, but conditions are a far cry from being anywhere close to normal. High water continues to restrict the number of barges tows can handle. Some areas will remain flooded until next month at least. And heavy rains could close the system again, perhaps as soon as this weekend.

Financial outlook - Uncertainty may not be good for most financial markets in 2019. But the fog on Wall Street is keeping interest rates low at a time when many farmers are borrowing more. 

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