04/09/19 — Weather has not been very nice in the Midwest since about late December, with some extremely cold and stormy days for much of the Midwest this winter. As spring arrived the past few weeks, temps warmed enough to melt most of the snow in the Midwest, bringing flooding in many areas. While planting to date is only slightly behind normal, more precip this week (some in the form of snow) will further slow down planting progress due to already soggy soils. So the planting start is less than stellar again this year.
Weather forecasts are still relatively wet for the U.S., with most of the Corn Belt forecast to have above normal precip and below normal temps the next 14 days. The exception to the cool/wet forecast is the HRW wheat belt, who is forecast to have below normal precip the next 2 weeks. However, so far winter wheat conditions are pretty good (much better than last year), so we still are likely to have a better crop than last year.
Crop progress was out yesterday afternoon, 4/8, and as expected it showed very little progress to date. Of course, it is still early so not much progress is normally made by the first week of April, either. For corn, we are 2% planted (equal to normal), with cotton 6% planted (1% ahead). Sorghum is 14% planted (equal to normal) while rice is 19% planted (2% behind). Sugarbeets are 3% planted (equal to normal), although none is planted in North Dakota or MN yet due to the cold/wet conditions so far. Oats is 27% planted, 5% behind normal while emergence is 25%, 1% behind normal. Winter wheat is 3% headed (1% behind normal) while spring wheat is 4% planted (1% behind) and barley 2% planted (7% behind). Winter wheat conditions are rated 60% G/E, up 4% from last week and well above the 30% rating last year. Overall, it so far is only a slightly behind normal spring planting season, although with wet soils and cool/wet weather forecasts the next 2 weeks, we’ll likely fall further behind normal.
Moisture conditions are quite wet across the U.S., with 93% of topsoil rated adequate/surplus (up 1% from last week) which is well above last year’s more ideal 77% rating. Subsoil is 92% adequate/surplus (equal to last week), also 20% above last year’s more ideal 72% rating. Soil moisture ratings are surprisingly wet, and are likely with a cool/wet forecast to cause a late start to planting in almost all states this spring.
It seems like a lot has happened since the grain price decline way back last summer once Chinese tariffs came on U.S. soybeans. But actually, there hasn’t been a lot of price movement from the lows made in September for most grains. Soybean prices oddly are a bit higher, while corn and wheat are at or below those fall lows. With no deal with China yet on trade, markets are taking further dips lower as projected ending stocks climb with each passing month. China — the biggest monopoly market player ever in the history of grain markets — is using its market power very strategically to try and “get back” the money they are losing in tariffs to the U.S. Now they are hammering canola and spring wheat prices down like they did soybeans (both Brazilian and U.S.), using lots of creative reasons to do so. You have to hand it to them — these communists don’t miss a trick. I imagine they are pretty good negotiators, too, using that same market power (as they have in the past).
China, recently the most successful country economically over the past 30+ years (which might be the best extended period of growth in world history) while decentralizing economic power from government to private business via capitalist type reforms, is reversing their decentralization economic policy to pull more power and control of business back into communist hands. So far, it has led to lower GDP gains, most recently the worst performance in the past 19 years. At some point, if China’s central command tactics upset enough people doing business with them, they might hurt their economy even more. It’s easier for foreign importers to punish China than exporters such as U.S. grain producers, but is still an interesting development.
While that remains a possibility, most people still think China can be a good trading partner, and are looking for a trade agreement to provide some protection. Time will tell.
For now, prices are relatively horrific for not only U.S. crops, but also Canadian crops as now China has effectively banned importing Canadian canola in the past few weeks. U.S. spring wheat prices have plummeted, as Canadian farmers are expected to shift 5-10% of canola acreage to HRS wheat. China used to import 20% of Canada’s production (40% of their exports as they export half their total crop), but for now they banned imports due to pests, a claim the Canadians dispute. While China continues to flex its market buying power, many countries are getting tired of their tactics used to drive prices down and exert their market power. Just like on the playground, after a while no one will want to play with the market bully.