By: Dan Hueber –
Snow in the northern reaches of this country and rain in the south, virtually assures that we will see little progress with fieldwork or planting in the next few days ahead in the U.S. Are the markets concerned? Obviously not, as this morning we have grains under pressure and beans/meal holding just a bit above water but realistically going nowhere. We are all quite aware of just how rapidly farmers in this nation can plant a crop when conditions become fit, so spring weather concerns are generally pushed aside quickly but we should not lose sight of the potential yield drag the later a crop is planted, which we should be especially mindful with corn this as if there is just 88 million acres planted, there can be no allowance for below trendline yields.
AgRural has provided updates for Brazilian crops over the weekend and estimate that the bean harvest is now 85% complete and the first corn harvest 72% complete. In each case this is off of last year’s pace but historically at this date, beans are normally 84% complete and corn 75%.
There appears to be little discussion of trade tariff’s or tensions this morning, which could be a two-edged sword, but it is worth noting a study that was released late last week by ag economists at Purdue. The study (click here) was commissioned and funded by the US Soybean Export Council and suggests that if tariffs are put in place for four to five years, the negative impact would be much greater than many have proposed. Interestingly, the ill effect would almost be equal to both the United States and China, forecasting around a $3 billion hit to the economies of both nations. Here at home though, the largest impact understandably would fall on rural locations. According to the study though, there would be one real beneficiary; Brazil. It is estimated that the they would garner the majority of the 37% cut in US exports to China and provide around a $2.7 billion boost to the economy of that nation. As I have commented previously, it is the long-term implications of these kinds of trade battles that we should truly be concerned with.
Outside of this, the overall news is a bit sparse this morning. Last week managed money added 35,000 contracts to their long position in corn, but sold 5,000 contracts of beans and covered 19,000 contracts from short wheat holdings. Macros are mixed as we have metals a bit higher, energies lower but the U.S. Dollar lower as well. Do note that the dollar has been very stagnant since breaking down in January. While we could still extend lower, from a technical perspective we have reached good retracements and support lines and have long-term indicators sitting in an oversold position, which would appear to have the stage set for a turn higher. If that is the correct, headwinds in the commodities markets will become stronger.