MARKET UPDATES GRAIN
Only certainty
is uncertainty
t
By Paul Dubravec
Advance Trading, Inc.
his spring’s planting progress in the
major corn belt states has been delayed by unseasonably cold temperatures and excessive moisture. Despite this,
the USDA crop progress report released on
May 28 pegged U.S. corn planting at
86 percent complete, still behind the fiveyear average for this time of year, which
is 90 percent. In looking at some of the
state-specific progress, there is reason to be
concerned. If you combine Iowa, Minnesota,
North Dakota and Wisconsin planting progress, it would equate to 23.1 million acres
still not planted. Considering that number
and the idea that preventative planting kicks
in as of May 30, we will likely see abandonment on some acreage and one million to
three million acres of corn acreage switch
to beans. Time will tell. Over the Memorial
Day weekend, there were parts of the corn
belt that received two to six inches of rain,
causing more delays in planting beans and
leading to some ponding/drown out in some
fields. Replant of corn is highly unlikely at
this point. Though there are plenty of stories
out in the market speculating how much,
if any, yield loss we will have or acreage we
could lose, the only thing for certain is the
uncertainty. Unless anyone can tell you without a doubt what Mother Nature is going to
bring us the remainder of this crop season,
we won’t know how big or small the crop will
be until fall.
Sorghum planting progress
released May 28 was pegged
at 43 percent complete, also
below the five-year average of
50 percent. If you look into the
state-by-state numbers, you’ll
see those states that are behind
on corn are also behind in sorghum
plantings. Fortunately for many of us in
and around the El Campo/Danevang area,
crops are looking good. For those farther
south and west, especially from Victoria to the
border, the crop conditions are nothing less
than miserable. Corpus Christi has received
some decent rains over the past two to three
weeks, which has led to some dry plant acreage showing signs of life, though the crop
will be much later than normal and yields are
expected to be half to a third of a normal crop.
Export demand on corn near term has suffered from the competition we’ve been given
by a large crop in South America. Many of the
destinations that are typically U.S. corn dominant are being undersold by Brazil and Argentine corn — by significant discounts. This
is evident in the year-to-date unshipped corn
sales being down 56 percent from last year,
while actual year-to-date shipments are down
44 percent. Milo, on the other hand, has seen
some good demand again, as is indicative in
the year-to-date unshipped sales being 20 percent higher than levels a year ago while shipments are up 34 percent year-to-date versus last
year. Tight stocks and good domestic demand
have kept futures prices somewhat supported
and elevated cash basis values to levels we have
not seen for this time of year. This is what has
and will continue to hamper any future gain
in export demand going through the summer.
Milo and corn production in Mexico was far
from strong this year — on a normal year, milo
production will equate to as much as 2 MMT.
This year, however, estimates coming from
sources in and around their major producing
areas are saying they hope for a final production number that would equate to 50 percent of
a normal crop. Mexico will need corn and milo.
Domestically, total demand is off from last
year, but still good relative to last year’s production — down 1.6 bbu in production from
last year while domestic usage is projected
to be down only 600 mbu. Ethanol margins
had been tight to even a loss up until the past
60 days. Today, positive margins could be
locked in through September, with October
showing a slight loss and then again positive
in November and December. Cattle margins
are still well in the red cattle brought to
—
market today are penciling a $280/hd loss.
Hog margins are penciling a $5 per head
profit on those brought to market today
while the poultry industry is seeing big margins on broilers of just over $1 per bird. Egg
producers are clearing just under
15 cents per dozen. Bottom line, despite
cattle margins suffering, other domestic users are profitable and will be in the market
for more corn for use through the summer
and into the fall. Domestic demand for milo
could easily see some growth this year as a
growth in interest by the ethanol producers
to use milo continues. Plants in the southwestern U.S. are gearing up to source and use
greater blends of milo in ethanol this fall.
For the near term, swings in demand will
influence the July and September futures
while weather through the growing season
will be the major influence for the December
forward months. The next major reports to
come out include the June 12 crop production
report and the updated acreage and stocks
report scheduled to be released on June 28.
Between weather and its certain uncertainty,
and the forever famous who knows what
reports from the USDA, one