WITH corn planting winding down, traders are now working to gauge the effects of delayed planting on final yield and production while analysts also try to quantify changes in export demand for U.S. corn, soybeans and meats.
To be sure, May was a challenging month for getting crops planted. An extremely late start — at one point tying the record for the slowest on record — had the market on pins and needles early in the month. Then, farmers planted more corn in one week than had ever been planted in such a short span of time, and everyone calmed down again.
What happened next? It started raining. Again.
With the month of May done, it's clear that precipitation was the meteorological story line of the month for agriculture.
Looking at data from the National Weather Service (NWS), a band of states stretching from Illinois to the Dakotas received between 150% and 300% of normal precipitation for the month (Map 1), showing, quite clearly, why those states struggled to get corn and spring wheat planted "on schedule."
Similarly, because those states dealt with such massive amounts of precipitation in such a relatively short span of time, an inland waterway system that was starved for water just a few months ago is now dealing with major flooding.
In fact, data from the NWS North Central River Forecast Center showed 56 gauges along the Illinois, Iowa and Upper Mississippi rivers in some stage of flooding as of June 6 (Map 2).
Grain analysts definitely see the delays as having lowered the number of acres planted to corn. A June 3 poll of 15 analysts conducted by Reuters found that the market was expecting a 2 million-acre reduction from the current U.S. Department of Agriculture estimate of 97.3 million planted acres.
The average trade estimate put total corn acres at 95.1 million and soybean acres at 78.2 million (versus USDA's 77.1 million). USDA will update its official estimate of planted acreage June 28, the same day it will release its "Quarterly Grain Stocks" report.
USDA's "World Agricultural Supply & Demand Estimates" (WASDE) report, due out June 12, is expected to give an indication of how much USDA thinks the planting delay has trimmed the crop's yield potential and total U.S. production.
Private analytical firms have lined up with their WASDE predictions, mostly calling for lower production. Lanworth trimmed its corn forecast 1% to 13.8 billion bu., based on an assumed 800,000-acre reduction in planted area.
Similarly, the firm also expects soybean acres to drop by 1 million acres, leading to a smaller soybean crop of 3.4 billion bu., down from 3.43 billion.
Allendale, on the other hand, made a much deeper cut, calling for a reduction of 2.25 million planted acres of corn and total production of 13.6 billion bu. For soybeans, the firm expects an increase of 1.75 million acres to push production to 3.37 billion bu. despite late planting and potential yield drag.
Demand for corn and soybeans, meanwhile, continues more or less unabated at current prices.
Ethanol producers have "found their mojo" again, with production during the last week of May accelerating by 22,000 barrels per day over the previous week, hitting 885,000 barrels per day — the largest average since June 2012.
According to data the Renewable Fuels Assn. compiled from the U.S. Energy Information Administration, ethanol producers are using roughly 13.4 million bu. of corn per day and producing more than 98,000 metric tons of livestock feed (along with ethanol) at current production rates.
This week's WASDE will also take a look at global production. On June 6, Brazil's agriculture ministry trimmed its forecast for the 2012-13 soybean crop to 81.3 million metric tons — still a record, though. The ministry also raised its estimate for total corn output to 78.5 mmt, also a record.
The question for Brazil, of course, is how much trouble the country's producers will have getting a likely record-setting second crop to the export market while it already struggles to ship a record-setting soybean harvest (story, page 20). The country's main ports are already choking on beans, and new trucking rules and higher fuel prices are making it more costly to move grain from field to port.
Russia announced last week that it will intervene in the grain market if its exports exceed 20 mmt. The agriculture ministry said it might purchase grain from the domestic market to keep the nation's exportable grain surplus on track with its official estimates. Current government-held stocks are roughly a quarter of what they were a year ago, before drought took its toll on the crop.
Speaking at a conference on the Black Sea coast, a deputy agriculture minister reportedly said Russia's exportable grain supply is roughly 18-20 mmt, and the country would purchase as much as 5 mmt to restock its own pantry. Last year, the country exported a total of 15.1 mmt of grain, including 10.8 mmt of wheat.
CME Group last week announced that it is expanding its agricultural options portfolio, introducing three new options on its newly acquired Kansas City Board of Trade (KCBT) hard red winter wheat futures contracts. Included in the offering now are KCBT weekly wheat options, KCBT-Chicago Board of Trade wheat spread options and Minneapolis Grain Exchange-KCBT wheat spread options.
"Since our acquisition of KCBT late last year, we've taken a number of steps to grow the existing KCBT futures and options contracts," Tim Andriesen, CME managing director for agricultural commodities, said. "We also committed to develop new and innovative options on KCBT wheat futures to provide additional trading and spreading opportunities for our wheat customers."
The new options contracts will be available for trade starting July 1, pending Commodity Futures Trading Commission approval. CME said the KCBT weekly wheat options will provide a tool for managing event risk, such as weather and USDA reports. Chicago Board of Trade weekly options for corn, wheat and soybean futures were introduced in June 2011.
Certainly, the biggest news in the wheat markets over the past two weeks has been the ongoing saga involving the alleged detection of Monsanto's Roundup Ready wheat in a volunteer stand in Oregon.
According to the U.S. Wheat Associates, Japan's Ministry of Agriculture, Food & Fisheries (MAFF) has temporarily suspended tenders specifically for soft white wheat from the U.S. but did not, as had been reported, cancel a contract for 25,000 mt of U.S. wheat, nor has it suspended or restricted all U.S. wheat imports, as some reports had indicated.
"Our organizations are also aware that private wheat buyers in Korea have temporarily suspended purchases of U.S. soft white wheat, pending official decisions from Korea's Ministry of Food & Drug Safety (MFDS)," the U.S. Wheat Associates said in a June 6 statement. "MFDS did announce yesterday that it had collected and tested 40 samples of wheat and five samples of flour milled from wheat that had been shipped/imported from Oregon and that all tests showed that no unapproved recombinant wheat has been identified to date. Unlike Japan's MAFF, Korea's private buyers do not issue tenders on a set schedule."
Taiwan's private wheat buyers said, for the time being, they would not purchase soft white wheat originating from Oregon. The European Union, meanwhile, recommended to its member states that they should test U.S. soft white wheat that will be imported.
EU nations have imported only a very small number of container loads of soft white wheat over the past several years and almost never import U.S. wheat from ports in the Pacific Northwest, the U.S. wheat group reported.