Trade Talks Continue and Weather Outlooks - Friday, 18 May 2018

Update for May 18th, 2018

 

Continuing trade negotiations, planting progress and summer weather outlooks are the driving force behind the current trading range we’ve been seeing.  The loss of around -20 MMT of production out of South America appears to already be figured into current trade range. The biggest “unknown” are the regions within the heart of the Corn Belt that remain to wet to plant as well as parts of southern Illinois, southern Indiana, parts of Missouri and several areas across the Delta where drought persists.  There have been conflicting reports regarding the trade negotiations.  Earlier in the week there seemed to be some progress being made in talks with the Chinese and now there are reports that China is prepared to reduce the trade deficit with the U.S. by $200 billion by 2020.  At this early stage there are no details and no agreements have been signed but the fact that the Chinese have made an offer is very positive. There has been some concern that NAFTA negotiations seem to have stalled but Canadian Prime Minister Justin Trudeau told Reuters today that he feels positive about the talks and a top Mexican official believes a deal could be made by the end of May. Canadian officials are in Washington furthering talks, Trudeau told the Economic Club of New York, “To be honest, we are down to a point where there is a good deal on the table. Its right down to the last conversations…I’m feeling positive about this, but it won’t be done until it’s done.” Some of the important factors in the markets:

  • Corn loadings fall below projected totals by 35 million bu.
  • Soybean shipments are 202 million bushels below expectations.
  • Additional sorghum shipments rerouted away from China 3 of which went to Japan.
  • Ethanol stocks are at 92% of last year’s levels.
  • Weekend forecasts improving for South America.
  • The extended forecast continues to show a warm and wet forecast for the Midwest as we enter the last full week of May.
  • Funds are currently long 183,000 corn and 112,000 soybean contracts and are short 1,500 wheat contracts.

On May 15th, private analysts group Informa estimated the U.S. 2018 corn acres at 89.0 million which is 950,000 acres higher than the March USDA Prospective Plantings report had estimated. In addition Informa also estimates 430,000 more acres of soybeans than the USDA report putting soybean acres at 89.4 million. In total all 2018 planted acres came in 1.6 million acres higher than forecast by the USDA in March.

The weekly USDA Crop Progress report showed an impressive advancement in corn acres planted.  This week’s report showed an increase of 23% for the week bringing the total corn acres planted to 62%.  Soybeans are 35% planted which exceeded trade estimates and the 5 year average.

 

 

Bloomberg reports that the La Niña weather pattern that developed last fall has dissipated so what should we expect as we look forward.  According to the U.S. Climate Prediction Center the La Niña system could eventually be replaced with an El Niño weather pattern due to warming sea temps in the Pacific Ocean.  This weather pattern has a 50% of developing by this winter. Typically El Niño winters bring extreme rainfall to parts of South America, decreases the amount of winter storms across the U.S. and if the system builds quickly enough it can also reduce the number of tropical storms and hurricanes in the Atlantic.

Weather Outlooks for this weekend and into early next week show the likelihood of broad rainfall coverage of ½ to 1.5” amounts across most of the Corn Belt with some localized spots expecting upwards of 3-4 inches according to the GFS Model.  The Euro Model is in agreement but it shows much lighter rainfall amounts of ¼ to ½ inch across the Corn Belt with some localized areas receiving up to an inch.

 

Long range forecasts are still showing a warmer and wetter than normal pattern for the rest of the month of May.

 

 

 

The latest Climate Prediction Center summer outlook for June through August is out and the majority of the U.S. with exception of the Corn Belt is forecast to have above normal temps. The Corn Belt has equal chances of temps receiving either above or below normal temps, the eastern portion of the country looks to be wetter than normal through the summer months.

 

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