Extreme Weather Update and USDA News - Tuesday, 02 May 2017

Extreme weather conditions are causing delays and in some areas fields that had been planted will need to be replanted.  In the hardest hit area’s producers are facing at a minumum of 1 to 2 week’s before planters can even begin to get back into the fields. Some weather forecasters are predicting another round of storms in the South and a continuation of below normal temps for much of the western and northern area’s of the country which will hamper soils from drying quickly.

The corn market currently has very little risk premium built into the price and Funds are short a record amount of contracts.  These factors may increase the sensitivity of the market to weather forecasts compared to most years.

USDA released their weekly Planting Progress findings yesterday and according to their data an additional 17% of the countries corn crop was planted last week bringing the total to 34%.  This is right on target with the nation’s 5-year average for this point of the season.  States of interest:

  • Illinois planted 29% of their crop last week bringing their total to 63%
  • Ohio jumped by 33% last week to 42% planted
  • Indiana planted 30% of the crop last week uping their percentage to 45%
  • Iowa managed to plant 20% of their acres bringing the total to 28%
  • 9% of the acres have emerged

 

U.S. soybean exports have seen a surge due to the lack of farmer selling in Brazil.  Newly harvested soybeans in Brazil typically are marketed quite quickly by producers in Brazil, this year only 49% have been sold which is a 7 year low.  According to an article in Reuters, producers are holding on to their bushels in hopes of a price increase.  This has greatly increased business for U.S. exports.  In the week ending April 20 U.S. soybean exports hit 808,000 tonnes, typically weekly sales are closer to 300,000 tonnes.  If this trend continues for an extended period the U.S. Department of Agriculture may actually increase the 2.025 billion bushel forecast for 2016-17.

Debate amongst traders is increasing in regards to whether recent weather complications will actually increase or decrease soybean acres this season.  The USDA Planting Progress report indicates that producers have been able to get soybeans in the ground and are actually running ahead of historical averages.  Data shows 10% of the nation’s soybean crop is planted compared to an average of 7% by this date.  States of interest:

  • Indiana and Ohio planted 13% of their soybean acres.
  • Illinois increased from 4% to 13%
  • Iowa now has 2% of the soybean acres planted up from 0 last week

 

A report from the USDA indicates that the next, “big demand story for corn could come out of Saudi Arabia.”  The report shows an increase in demand for 2017-2018 due to a switch within their livestock industry from using barley in feed to corn and wheat which will increase imports of those products.  According to information in the report, “as their domestic feed processing is expected to drastically increase in the next few years, Saudi Arabia’s demand for corn will grow exponentially.”  The country does not produce much corn so the government is offering an import subsidy to importers of +$82.40 per metric ton in hopes of reducing the costs of the production of poultry meat and eggs, dairy and other livestock products through cheap feed. “Ultimately, Saudi Arabia remains a bright spot in an otherwise fairly gloomy U.S. corn demand outlook.” The U.S. currently is the largest source of corn imports into the country with 43% of the business, this percentage is expected to increase over the coming years.

 

Last Thursday, President Donald Trump announced that he plans to renegotiate the NAFTA policy with Canada and Mexico that he previously had promised to terminate.  New Ag Secretary, Sonny Perdue, explained the change in plans as “deal making”.  NAFTA has been a beneficial agreement worth billions of dollars to the nation’s agriculture economy with Canada being our #1 importer of all farm exports and Mexico #3.  Not all U.S. industries thrived under the agreement though with the U.S. auto industry losing many jobs as a result of the original NAFTA policy. Perdue went on to say that, “he (Trump) has to send a signal to Canada and Mexico and to Congress as well, frankly, that he’s serious about renegotiating NAFTA. And that he believes that there are things that need to be redone, retooled.”

A vigorous storm system that moved through the nation’s midsection last week brought with it record flooding in some areas.  Some 100 year old river record crest levels were shattered over the weekend as a result of record flooding from the Ozarks into the mid-Mississippi Valley.  Some of these same locations are expected to receive additional rainfall Wednesday into Thursday, adding to the flooding situation, as much as 11 inches of rainfall already fell this weekend in some areas.  The maps below detail the estimated amount of precipitation received last weekend, the amount forecasted for this week and the Mississippi River level in Missouri as of last Sunday.

 

What’s in store for the rest of the growing season?  At the current time most forecasts aren’t expecting any extreme weather conditions which is common during an El Niño influenced growing season. Some of the weather models are showing a warm June followed by a cool July and warm August.  Remember though, an El Niño pattern does not guarantee perfect growing conditions followed by record yields.  For instance, in some El Niño years the corn yield does not exceed 90% of trend which would equate to 160 bushels if it occurred this year. Of course there are also those years when corn yields exceed record numbers and could reach 111% of trend.  Soybean yields tend to be a bit more predictable, generally increasing by 4-6% which could push the soybean yield to 50 bushels per acre.  All of this is speculation at best, but important to keep in mind as the season continues. 

The precipitation map below shows the expected rainfall totals for  May 1st through next Monday, May 8th.

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