Corn continues sideways trade.
July corn was 1-1/4 cents lower this week to close at 318. December futures were 3/4 of a penny higher to close the week at 332-3/4. Rains are falling and are predicted to continue falling over much of the western Corn Belt this weekend. For most, the rains will be welcomed given drier than normal conditions in the last month or so. Most of Iowa, eastern Nebraska, and western Kansas have been drier than normal which has allowed them to hammer out planting at a blazing pace. Others in the eastern Corn Belt have not been as lucky. Ohio producers were reportedly 57% completed with corn planting as of last Sunday, this compares with the 5-year average of 74% complete. Multiple rounds of rain in the last seven days have impeded fieldwork for much of the eastern Corn Belt. All these planting progress numbers must be taken with a grain of salt however given last year at this time overall planting progress had just breached 50% compared to 80% complete here in 2020.
China will reportedly start selling corn from its state reserves next week. Corn prices in China’s top-producing province have increased by 15% this year as demand has been stronger than expected. This is a good sign that grain supplies are tightening at least somewhat. China has been selling grain from their huge state reserves for the last few years and officially suspended their stockpile program in 2016. It is unknown how much the government plans to sell this year or how much grain remains in the stockpiles. Traders will continue watching closely for Chinese purchases of US grain in the coming months.
Soybeans lower this week.
July soybean futures were 5-1/4 cents lower this week to close at 833-1/4. November soybeans were a penny lower this week to settle at 844-1/2. Soybeans traded lower this week mostly due to increased trade tensions between the US and China raising concerns about the fulfillment of the Phase One trade agreement. So far, China has bought 14.5 million tons of US soybeans in 2020. China has bought 24.7 million tons from Brazil in the same time-frame. Soybean planting pace jumped to 53% as of May 17 which was 15% ahead of the five-year average. Only Arkansas, Missouri, and North Dakota were behind their averages due to wet weather.
Looking at the National Weather Services 90-day outlook, plentiful rains are expected this summer. Above-normal precipitation is predicted over pretty much all of the Corn Belt. The NWS is also calling for normal temps for most of the Midwest with heat in the far western US as well as the far east. This forecast looks rather favorable for both corn and soybeans that have been planted early into what some in Iowa are calling the best field conditions in years. Odds of a La Nina developing (warmer and drier conditions) during the growing season are estimated at only 25% to 38% by the Climate Prediction Center.
Wheat looks to find support.
July Chicago wheat was 8-1/2 cents higher this week to close at 508-3/4. July KC wheat was 7-3/4 cents lower this week to close at 444-1/2. MPLS spring wheat was 6-3/4 cents higher this week to settle at 513 on its July contract. Russia’s IKAR downgraded its 2020 wheat crop by 5.3 million tons on Friday due to dryness in several southern regions of the country. The cut predicts Russian production to be 1.2 million tons lower than last year’s crop that came in at 121.2 million tons. Russia and Ukraine, two major wheat exporters in the Black Sea region, faced extremely dry conditions for much of April. Beneficial rains have helped to start May but IKAR noted most of the damage has already been done.
Spring wheat planting here in the US remains behind pace by 14% as of last Sunday. With cash spring wheat prices below $5 in many areas, the incentive to plant past insurance deadlines is just not there this year. Drier conditions are expected to arrive in the next two weeks for much of the northern Plains, but it may be too little too late for spring wheat acres.
Futures Skeptical of Spot Price Action
Spot prices were mixed this week with butter and whey trading lower while cheese and powder prices finished higher. The block/barrel average continues its tremendous move higher as it closes out the week at $1.9138 or 16.375 cents higher. In the last month and a half cheese prices have gone from $1.00/lb to $1.9138/lb. Historically it has been very difficult for cheese prices to maintain near or above the $2.00/lb level. After gaining 32 cents last week, the butter market took some of that back losing 5.25 cents on the week. Powder prices have broken above the psychological level of $1.00/lb but may need to take a pause after gaining 7 cents this week. Whey prices look to have had a false break out of $0.40/lb last week losing 2.75 cents and closing at $0.3625
The Class III 2020 average traded from $16.04 to $15.78 to finish out the week. So, even with the rapid increase in cheese prices futures are beginning to be skeptical of how much further this move can go. The market has quickly gone from wondering how much lower can the spot trade move a month ago to asking how much higher can the spot trade go currently. If spot trade continues at the rapid pace futures are well behind current spot pricing.