What is this thing between summer and winter? (Grain Marketing)
(Editor’s note: John Hall is a professional commodities analyst.)
For many years, I have said we only had two seasons in Maryland — summer and winter.
The year has given me the spring I have long waited for, but now it is time for summer.
Hasn’t this May been different? It may snow, it may rain, it may be warm or it may not be. The planted crops sure need some warmth and sunshine.
I got some beautiful vegetable plants from the Ceasar Rodney plant sale and set them out three weeks ago.
They have not figured if they want to live. I had a chance to take a quick trip to Ohio on May 16.
The crops we saw were in the same stage as here. Many acres were recently planted but few had emerged.
The USDA Crop Progress report released May 18 showed corn planting at 80-percent complete, well ahead of last year’s 44 percent and ahead of the five-year average of 71 percent for this time.
Soybean planting was reported at 53-percent complete well ahead of last years 16-percent rate and the five-year average of 38 percent.
Hard red spring wheat planting was 60-percent complete, near the 63-percent rate reported last year, but well behind the five-year average of 80 percent.
Wet weather has affected several areas in the upper midwest. Heavy rains caused flooding in Michigan, and parts of Illinois along the Illinois River and north along the Mississippi.
The western Corn Belt, for the most part, has been relatively dry from Iowa out to Nebraska.
I understand planting in North Dakota has been challenging.
North Dakota grows almost half of all spring wheat and is the reason wheat planting is behind.
The current markets are sluggish at best.
On May 21, July corn closed at $3.18 while December closed at $3.23 with both trending sideways.
The July bean contract closed at $8.42 and the November at $8.50 and were both trending sideways.
July soft red wheat closed at $5.20 this same day.
Is there an upside in the market?
Right now, the USDA is estimating 97 million acres of corn will be planted, up from 89.7 million last year.
In the May USDA Supply and Demand Report, feed usage was cut by 110 million bushels due to the slaughter plant shut downs causing hog and poultry kills, and ethanol usage was cut by 100 million bushels.
It is currently estimated there is a 7-percent decline in chick placements, cattle placements are down by 23 percent in April and likely 10-18 percent in May with similar reductions in hog production.
It is difficult to see usage increasing, but do the math!
Potentially 1.7 billion more bushels available and usage cut.
In this May Supply and Demand estimate, this took the ending stocks estimate up to 22.4 percent!
This would be the largest ending stock since 1987.
Things will need to change dramatically to create much of a price rally any time soon.
Beans may offer a little more upside. In the May Supply and Demand Report ending stocks for the 2019-20 crop were increased due to a decrease in export sales.
If acres remain at 83.5 million acres this year, ending stocks for new crop is estimated at 405 million — 175 million fewer than old crop.
The question becomes: How many acres will be switched from corn to beans?
Allendale reported it is starting to hear a lot of talk that anywhere from 1 to 1.5 million acres could be switched from corn to beans this year.
About 50 percent of all beans grown need to be exported.
Will exports increase? Personally, I am sick of China playing us.
Will they abide by the trade deal? Who knows?
The good news this week is that most slaughtering plants have reopened, although many are not yet at full capacity as engineers try to figure out the “correct social distance” for workers.
I understand there may not be much incentive for employees to return to work since unemployment benefits maybe higher than wages.
It was reported last week that cattle plants were up to 100,000 head daily and hog plants up to 400,000 head daily. Wow!
Last week USDA secretary Sonny Perdue announced more aid to farmers. I understand aid to dairy, poultry, and livestock producers that had to destroy product due to processing shut downs.
I am not as supportive of grain handouts when producers could have marketed their grain at prices much higher than they currently are.
I am further disappointed to report that Brazilian farmers have been taking advantage of the weak “real” and have pre-sold 30 percent of their soy crop for next year.
They say that this could go up to 50 percent by September when planting season starts up.
Profit margins in ag are very small, but hopefully still positive at this time. Only those that know their costs of production will survive.
We cannot expect government programs to bail out poor management.
If the United States is going to come out of this pandemic strong, we all must tighten our belts and work smart.
(Note: I research material from Allendale, DTN, USDA, University Land Grants and other credible sources in compiling this article. It is not merely my opinion, but rather a consensus of experts in the trade. Looking for a marketing coach or someone to discuss strategies with? Contact me at email@example.com, or call 410-708-8781.)
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