US corn futures closed at a two week high on the back of speculation US sown area may not make USDA initial projection.
It has nothing to do with the corn / wheat spread trade, or an escalation in the Ukraine / Russia war, or a weaker USD, or hot dry weather in China.
US weather across the corn belt has been wet if you believe the report. Looking at WorldAgWeather.com we see the 30 precipitation anomaly is roughly bang on average for Iowa, Illinois and Indiana, the three main corn states. Conditions across Nebraska have been a little wet.
In this weeks crop progress report corn sowing was estimated at 93% complete for the USA. Iowa at 97%, Illinois at 93%, Indiana at 86% (1pts above this time last year) and Nebraska at 98%, above the 5 year average. Emergence was pegged at 78% for the US, versus the 5 year average of 77%. So it’s hard to argue that rain delays are the issue.
It is arguable that too much rain may be creating some establishments issues, hence the lower year on year crop condition rating, 69% G/E vs 75% last year, but also keep in mind that the average is closer to 68% G/E.
With only (let’s assume they have sown a little this week) say 4% left to sow, that’s roughly 3.8 million acres. Take that off the projected 95.3 million acres, that makes it 91.5 million acres. The corn area now comes in at roughly 200k acres larger than last year. The average US farm gate price last year was just 435c/bu (US$171.25/t), just 15c/bu (US$5.90/t) higher than the current projected farm gate price. The question then becomes, is US corn futures at 448c/bu for December sustainable given the crop is in average condition, and in some cases sitting in mud. Or is US soft red winter wheat futures, at 133c/bu above corn, dragging corn higher as wheat pulls itself out of the feed ration. US wheat remains very well priced into the international market, there’s little reason for it to fall further given the current export sales pace unless we start to see some more competition from the Black Sea or France but that doesn’t appear to be eventuating just yet. In summary, wheat looks flat but may drag corn even higher in the short term…….maybe…. I’m not a punter.