Mid Week Comments

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Corn Breakout!!! - 06/18/19

Corn rallied above the nearly 5 year highs late last week, indicating the
potential for corn to test the next resistance level at $5.15 corn on long term
charts. The breakout of corn from the previous 4 year, relatively low priced
range is important, indeed! Now grains have new life breathed into them by the
dynamic corn market, and the rest of commodities may also rally as well. The
impetus for the corn rally has been the horrible spring planting conditions
which probably have trimmed corn carryout potential a great deal. USDA already
said in the June report that we lost 3 million acres of corn that won't be
planted, and another 10 bu/acre from yield of the late planted corn that did
actually get planted. But that is just the beginning. As of yesterday, June 17
there still was 8% of the nation's corn unplanted, or about 7.2 million acres
for harvest. To lose 170 bu/acre on 7 million is nearly 1.2 billion bushels of
lost production. Add in 10 bu/acre loss on the remaining 80 million acres
harvested subtracts another 800 mb production. Essentially, there is now NO
carryout of corn, and the production season has just begun. What if a dry
period hits, or a cold period that prevents maturity, or an early frost??? The
market will be extremely sensitive to any weather issues.

Weather forecasts today (6/18) remain wet for the Midwest through the next 7
days, with about 3" of rain forecast for virtually all of MO, ILL, IND, OH, and
KY. That will effectively end the planting period for soybeans, with the rain
set to start tomorrow morning and 1-1.5" the next 3 days, followed by the rest
the next 4 days. With the final planting date June 20 in these states, prevent
plant will occur for millions of acres of soybeans - something the market has
not yet anticipated (some still think soybean acres will go up!).

23% of the soybean crop is unplanted on 6/17 (about 20 million acres), and most
of it is in ILL (30% unplanted and 25% behind normal), IND (36% unplanted and
30% behind normal), MI (47% unplanted and 41% behind normal), MO (43% unplanted
and 24% behind normal), SD (30% unplanted and 28% behind normal), OH (54%
unplanted and 48% behind normal), and WI (23% unplanted and 16% behind normal).
A case like SD is worth studying: their final planting date for soybeans was
June 10 which ended last week: The planting progress report shows 27% of the
soybean crop was "planted" last week as these numbers went up that much. But
did they really, or did actual planting go up 13%, and abandoned acres went up
14%??? The question on this survey is how much do you have planted (not in
acres in percentage)? If you gave up and planted 500 acres and will prevent
plant 500 acres, what is your planting progress? 100%, or 50%? In corn where
the final planting date in SD is 5/25 and 5/31, 14% of the crop was "planted"
last week too. Or did farmers just report "I'm 100% planted corn, with 500
acres planted and 500 acres prevent planted". IF SD planted 14% more corn last
week, it would all be for silage as corn WILL NOT mature in SD planted June 10-
17! SD doesn't have the capacity to harvest 14% of its corn acreage as silage,
so we know 14% of SD corn acreage did not get planted last week!!! How about
their soybeans? And how about all other states in this progress report???

As we said yesterday, planting progress numbers are going to mean less and less
as time goes on because what is the answer when someone asks a farmer what
percentage of his intended corn he has planted on July 1 if he has 800 acres
planted and he has 200 prevent planted? Is he done planting corn on July 1?
The answer would be yes, I am done planting the 800 acres I will plant in 2019.
Or it could be I am 80% planted? So like in HRS wheat, the number in all grains
goes to 100% fast even though the new intention is to plant something else or
PP, not plant HRS wheat. My point is these numbers go up even though nothing
gets planted - as farmers give up on planting the crop.

Having said that, this planting report is saying corn planting increased 9% last
week. Really? Where can you plant corn from June 10 to June 17 and still get
anything but silage? No where in the northern half of the corn belt! But even
if you believe it did, there is still 8% of the corn unplanted, or 7.2 million
acres. I submit to you that 7-8 million acres of corn is unplanted this year,
and 7-10 million of soybeans will be unplanted. If it is planted after June 25,
it won't matter as the yield will be virtually nothing usable. And corn planted
after June 5 in the northern corn belt and June 10-15 in the southern belt will
also be virtually zero yield (except silage).

Crop ratings also were out, with corn steady at 59% rated G/E, and the Pro Ag
yield model dropping another 1.5 bu/acre to 164.5 bu. We lost another 120 mb
last week in production on yield losses, cutting corn carryout further with
smaller yield potential. But winter wheat yield prospects improved 0.18 bu/acre
on steady ratings (64% good/exc). So we gained 8 mb of wheat, and lost 120 mb
of corn. Since wheat is a feedgrain substitute for corn, that isn't offsetting
the losses in corn production much. That's why with a feed shortage, corn is
the big dog grain, and wheat (normally a food grain) an also ran in determining
price.

Cotton planting is 89% complete (5% behind normal), sorghum 69% planted (12%
behind normal), and sunflowers 68% planted (12% behind). HRS wheat is 2%
headed, 10% behind normal and ratings dropped 4% to 77% rated G/E. Barley
dropped more, with ratings down 8% to 76% rated G/E, and heading percentage also
10% behind normal. When the heat hits in July, barley and wheat won't like it
and will suffer yield loss, too. It hard to get average yields or better when
planted late for almost any crop, and that's the situation in 2019 for virtually
everything.

This situation is still bullish, with the full extent of acreage losses still
not known (and likely not to be fully known until late summer/fall when FSA data
is available). The acreage report at the end of June will show June 1
conditions, and this year we weren't even 50% planted with the important crops
on that date. So the market has a lot of price discovery to accomplish, and
we've got a long ways to go to determine how poor yields will be with this late
planting.


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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