Good morning. Our corn rally is back in progress this morning, after taking a brief respite yesterday afternoon. It’s always more fun to see the market go straight up without any pause, but that’s not going to happen in May with a fund short of over 1.4 billion bushels. The funds have been net purchasers of an estimated 285 million bushels the past three sessions, so the liquidation of that short is in full motion. There is plenty of buying left to do and the urgency should pick up in the coming days if the current forecast holds true. The seven-day forecast looks ominous and that could be an understatement. Some areas in Iowa are now projected to receive up to 7 inches of rain, which would wreck some of their recently planted corn acres. We have seen some progress in the western Corn Belt this week, but that area is expected to see the brunt of the heavy rains through the 14th day. The forecast looks wetter for Illinois as well, which just can’t get dried out. I drove 90 miles yesterday to the south of Lafayette, Indiana and once again did not see one piece of equipment of any kind in the field. We’re now looking at the latest planting situation in this area since 1995, which turned out to be a poor growing season for us.
Nationally, we’re also headed for the latest planting season since 1995. We had been trailing 2013 nationally, but that will be history on Monday, as a record 43% of the crop was planted that year in the third week of May. Another very slow year up until next week was 2009, which eventually turned out a record crop. However, that summer was about as perfect as you could get and that’s not an easy thing to depend on, given that our last lousy one was seven years ago. I’m starting to hear a lot of chatter about 5 million acres coming off the current estimate of 92.8 million, which would shake up the apple cart in a hurry. The incentive to plant in the mud in early June simply isn’t there this year if you’re at the highest levels of coverage. In early trading we’re seeing the July contract up 5 cents to $3.74 1/2, with the December up 4 1/4 cent to $3.93.
Soybean futures continue to tag along with corn and that dynamic shouldn’t change much in the coming days. At some point, we’ll start talking about potential yield damage and perhaps even lost acreage. We’d typically gain some acres with this kind of situation, but that might not be the case this time around with cash prices still below the $8 level in many areas. The fund short stands at an estimated 845 million bushels, so there is still a record amount of short covering to be done if this weather situation doesn’t turn in a hurry. The demand situation is showing no signs of improvement and will continue to be an anchor on prices, but the next couple of weeks should see a heavy lean towards the supply situation. I wouldn’t be shocked to see a “9” back in front of the November contract by this time next week, but that will be totally dependent on the current weather forecast coming through. So far this morning we’re seeing the July contract up 3 3/4 cents to $8.39 1/4, with the November up 4 cents to $8.63 3/4.
July wheat futures are up 7 3/4 cents to $4.56 1/2 this morning, with the September contract up 7 cents to $4.63 1/4. Wheat futures have generally been following along with corn and soybeans, but some supply destruction is currently going on. Some very heavy rainfall is being projected for eastern Kansas and all of Missouri, which is not the best of timing for developing wheat. The forecast is also dire for the spring wheat areas, where quite a few acres are still left to plant. If the current forecast holds true, some of those acres will not be planted or could be converted to soybeans. The export situation has perked up the past couple of weeks and there is some attention being paid to a dry spell in central Russia. In short, there are some things in motion that could push futures higher in the coming days and perhaps even weeks.
The Dow bounced back nicely yesterday off its early session low, as President Trump delayed a decision by six months to slap a tariff on European autos. He did declare a national emergency last night over the threats to U.S. technology, which was a direct shot at the Chinese tech giant Huawei. That’s not going to help the trade situation, but early futures action is suggesting a calm opening at 9:30 EST. Interest rates have fallen to a 17-month low, with the 10-year showing a hair over 2.36% this morning. Gold futures are up a buck to $1,296, with the Dollar Index mildly lower at 97.49.
Crude oil futures are up 44 cents this morning to $62.47, with gasoline up a couple of cents to $2.03. Diesel futures are also up 2 cents to $2.10, with ethanol sliding back a penny yesterday to settle at $1.34. Ethanol production rose last week, with a grind of nearly 107 million bushels being recorded. That pushed ethanol stocks higher, resulting in the pressure on futures. The State Department has ordered all non-essential employees to leave Iraq, which is fueling fears of a confrontation with the Iranians.
The national radar map is quiet this morning, but that’s not going to last long. A major system is still being projected for the heartland, with 3-7 inches of rain possible over much of Iowa, southern Minnesota, Wisconsin, eastern Kansas, and Missouri. Some of the heavy stuff will make its way into western Illinois as well. The extended maps are not offering much hope either, aside from a very nice warm-up for the majority of the Corn Belt. Going out further, some models have this pattern continuing into the first week of June, which would place several million more acres of corn in jeopardy.