Mid Week Comments

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Corn Weather Market - 05/21/19

Corn came alive a little over a week ago, and prices have now run over 50c
higher in 8 trading days. That has erased the past 6 months of trading with
losses, and prices are now in the higher end of the previous few years. What a
difference a week makes! The market is rallying after finally waking up to the
late planting scenario that has developed most of this spring.

Its probably time to sell some corn, as the market chatter seems to finally
understand the situation corn is in with delayed planting. While our estimate
of 4-6 million acres lost to PP (give or take a million or two) and some yield
loss has been sitting out there for a few weeks now (which is why we went long
corn), finally we are hearing estimates from the CBOT of these numbers and
higher. Yesterday we heard an estimate of 10% lost corn acres nationally to PP
(9 million acres) which seems high, and 30 bu/acre lost due to late planting.
These estimates seem ridiculously high, so perhaps its now priced in the
market??? Undoubtedly we will lose corn acres and yield, but the panic now in
the market is exactly what typically is wise to sell.

Every market advisory and farmer in the country has their sights set on selling
corn from $4-$4.40 Dec as that has been the high range in the past 3+ years. So
of course, if everyone is going to do it, it probably is going to be wrong.
What market participants are probably blind to is the chance of the market to
rally beyond $4.40 or $4.50 corn futures. It has happened before, and under
extreme situations it can happen again. But in order to get there, we have to
slug through a tremendous amount of selling from $4-$4.50 Dec futures. My point
here is that IF we hit all those price objectives from $4-$4.50, we'll probably
go a whole lot higher.

Basically that leaves one with two choices for sales now (a 50c rally does need
to be rewarded with some sales): 1) Sell a bunch now, and then watch and see if
the market can clear all the other selling coming from $4.10-$4.50 futures; If
it does clear $4.50, hold off a bit to see how high the market can go. Can we
rally above $5??? 2) Scale up sell along with everyone else between $4.10 and
$4.50.

Selling some grain now does not say we believe the market can't go higher this
year, but the pace of gain cannot be sustained much longer, either. We are due
for a 20c or more setback, and we'd rather price some grain now than have to
wait another 3 months or more if we can't climb back very quickly. Also, the
whole world seems to want to sell corn between $4.10 and $4.45 this year, and if
we can run to $4.45, there is probably a 50% chance it will go much higher (over
$5). Because the market is unlikely to let everyone sell at a good price, and
then go down. If it has the bullish fundamentals to rally to $4.45, it will
rally much higher.

Weather is still not good for planting, with heavy rains today in TX, OK, KS,
MO, ILL, and IA and spreading east and north. The next 7 days show above normal
rainfall in the corn belt, with the heaviest accumulations in SD, NE, KS, IA,
MO, and ILL. It dries out a bit in the 8-14 day to near normal precip, with the
wettest in TX, OK, and KS (will winter wheat start getting disease???). Temps
are below normal in the northwest half of the corn belt, and above normal in the
southeast. Temps cool a bit in the 8-14 day forecast seasonably to normal to
below normal.

Planting progress is still pathetic, with corn 49% planted (31% behind normal),
and 19% emerged (30% behind normal). Soybeans are 19% planted (28% behind
normal), and 5% emerged (12% behind). Sorghum is 26% planted (12% behind), with
surgarbeets 90% planted (1% ahead of normal). HRS wheat is 70% planted (10%
behind), with a good week with 25% planted last week. Barley is 76% planted (6%
behind), who also had a good week with 18% planted. In some cases, producers
may have given up on planting HRS wheat and instead switched the acreage to
soybeans or another late season crop as its getting late to plant HRS wheat
(especially in SD). Oats planting is 77% complete (13% behind), and sunflowers
3% planted (9% behind). So essentially everything is still quite late, with
corn and soybeans lagging the most while HRS wheat and barley actually had a
good week of planting progress.

One thing seems constant: winter wheat yield prospects continue to improve in
this wet/cold spring as wheat enjoys cool/wet weather to a point. But now that
95% of the wheat is headed in HRW wheat country, continued rainfall there can
cause devastating diseases late in the year. Right now the Pro Ag yield model
continues to rise as winter wheat ratings rose 2% to 66% G/E. Pro Ag projects a
52.5 bu/acre yield this week, up 0.32 bu and well above USDA's 50.3 May
estimate. Unless disease takes down the winter wheat crop, we may challenge the
2016 record yield of 55.3 bu/acre.

Ray can be reached at raygrabanski@progressiveag.com.
+++++++++++++++++++++++++++++++++++++++++++++++++++
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm
in the country. See http://www.progressiveag.com for rankings and link to data
from Top Producer Magazine and Agweb.com.

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