Market analyst: Protestors and riots
6/2/20 — U.S. grain markets have perked up a bit lately, helped by more aggressive Chinese purchases of U.S. soybeans and concerns over the 2020 crop. Drought concerns have been renewed with a hot/dry forecast for the western Corn Belt the next 2 weeks. Even the eastern Corn Belt is threatened with heat.
Weather forecasts have continued the improved chances for rain in the eastern Corn Belt, with the 8-14 day forecast calling for above normal precip in that area now. However, the western Corn Belt will see below normal precip the entire 14 day forecast, with above normal temps (hot and dry). The heat will also occur in the east, but the improved precip chances keep the crop outlook decent. There is virtually no organized rain system today in the Corn Belt.
Crops are developing and planting continuing, with corn 93% planted (4% ahead of normal), with soybeans 75% planted (7% ahead). Corn conditions improved 4% to 74% G/E, with corn yield models rising nearly 2 bu to 177 — 2 bu above trend. But winter wheat went the other way, with conditions down 3% to 51% G/E, and the yield model dropping 0.279 bu/acre to 51.29 bu, still about 0.5 bu/acre above trend. The heat that’s coming may not damage corn and wheat much given high soil moisture conditions in the Corn Belt, but it could still significantly damage soybean yields if soil moisture is depleted by the time pod filling comes. Soybean crop conditions came out for the first time this week, with a 70% rating in G/E. However, the yield model is right at trend yields, which is about 0.6 bu/acre below USDA’s number, so they are too high for a yield estimate given this crop. Bullish soybeans?
HRS wheat is 91% planted (5% behind), but a significant amount of acreage has also been abandoned — especially in North Dakota. Also, almost none of the 50% of 2019 corn left out (unharvested) all winter will get planted as it’s not drying up quickly enough. So ironically, while some soils are drying out due to lack of rain in North Dakota, others covered by corn trash still haven’t dried enough to plant. That’s why it is so important in this cold environment of North Dakota to get soils worked in the fall — and that wasn’t possible in 2019. So prevent plant acres will be relatively large in North Dakota (the state with the second largest tillable acres) — especially corn ground. HRS wheat that got planted is rated relatively high — 80% G/E vs. 74% last year at this time. But barley conditions are not, with only 69% rated G/E vs. 88% last year. Eighty-four percent of U.S. topsoil and 85% of subsoil is still rated adequate/surplus, down 2% from last week but still about 5% below last year. Soil moisture ratings are still high, so initial heat will probably benefit corn and soybean crops to get them to grow. But the rapid depletion of soil moisture could haunt soybeans come pod fill in August.
It’s a bit ironic that right after the U.S. complained about China reining in Hong Kong protests that the U.S. called in the National Guard to rein in U.S. protests/looting. The U.S. has determined that instigators are inciting violence following peaceful protests each day. So are these instigators Chinese supported, George Soros supported, or maybe both? And are they really peaceful protesters by day, and instigators by night? Many believe we have given them too much leeway to damage property, vandalize it, and loot stores.
One positive for agriculture: It will be harder for the U.S. to crack down on China for crushing protesters just a week or two after doing it ourselves. So maybe we can trade with China, our protest-busting partners? After all, we have problems, they have problems — perhaps we have more in common than we think!
We note that since the U.S. protests have begun, the Chinese have been back buying heavily in the U.S. soybean market. A coincidence? Maybe. But perhaps the saying, “We’re all in this together,” doesn’t just apply to COVID-19.