Weekly Market Wrap-Up

The markets were fully focused and directed by weather this week. Rains over the weekend and throughout the week fell as predicted. Weather is not looking conducive to planting through June 2^nd. Premium has been built into the markets throughout the week, but funds are still wrestling with the magnitude of potential new crop corn supply loss due to declining acreage and yield reductions. The USDA’s planting progress report confirmed an extreme lack in progress which sparked more short covering throughout the week, and with no real window of planting opportunity in sight, expect this to continue and short-term price direction to remain higher. Overall planting is extremely far behind the 5-year-average and with prevent plant dates quickly approaching there simply may not be enough time to catch up. It is now approaching decision time for the farmer: chance planting corn, prevent plant, or switch acreage to soybeans. These decisions will define the 2019 crop year moving forward. There has been limited farmer selling which has allowed the shorts to easily overwhelm the market. 

Thursday afternoon the USDA announced it will take steps to assist farmers adversely affected by the trade war.  The package will include up to $16 billion dollars in total relief including $14.5 billion in direct payments. The payments will be made in a series of 3 rounds. The first payment can be expected in July/August after FSA crop reporting is completed. If trade relations do not improve than the next two rounds of payments can be expected in November and January. For producers of corn, soybeans, wheat, and other commodities payments will be made “…based on a single county rate multiplied by a farm’s total planting to those crops in aggregate in 2019” in an attempt to not skew acres, per the USDA. Rates for individual crops will be released later. Markets initially took on the idea that the new package would lead to less prevent acres this spring but quickly came to the realization that mother nature will do most of the dictating on prevent plant.

July corn opened the week at $3.86 and closed at $4.04. An 18-cent increase. Corn futures gapped higher twice to start the week to 11-month highs supported by weather concerns. Last Friday’s COT report came as a surprise as it was revealed the corn funds were still 280k contracts short. It is hard to gauge how short the fund still is as covering was evident all week but expect prices to remain volatile until the short is fully covered and new crop declines can be accurately assessed. The crop progress report released Monday had corn at 49% complete, compared to a trade guess of 53% and 80% five-year-average. The 49% by this week’s date is the slowest pace on record, dating back to 1980. On Tuesday, corn filled its gap but was still holding above its 200-day moving average. On Friday, corn futures reached their highest levels in a year.

July soybeans opened the week at $8.28 and closed at $8.29. A 1-cent increase. Soybeans are at 19% completed compared to a 47% five-year-average. The markets are well aware the world supply does not need additional U.S. beans which caused markets to react negatively to the leaked aid package news on Tuesday. Overall, soybeans followed corn higher throughout the week. With the long-term forecast calling for continued rains, there have been murmurs of the delay in soybean planting despite needing a much shorter growing season.

July wheat opened the week at $4.69 and closed at $4.89. A 20-cent increase. Wheat hit one-month highs as weather out west was less than ideal and momentum in the corn market moved all funds higher. The planting progress report had 66% of the wheat crop in good to excellent condition compared to a 64% five-year-average. Wheat jumped late in the week on the back of bargain buying. Overall, wheat gains continue to be capped by the realization of the ample world supply.