Heartland Farm Partners Closing Market Comments May 5, 2021

Today’s Prices

Grain prices continue to work higher as this has now become a weather market. U.S. weather cooler and drier than desired while Brazilian weather continues to shrink the safrinha corn crop.

Grain Market News

Brazil: 2nd Season Corn Production

This map shows the 2nd season corn production or the safrinha crop. This is planted following the soybean season. Mato Grosso in the northwestern region is the largest producer. The good news is that Mato Grosso has seen some decent rains over the past 30 days. This chart is shown in mm so 100 mm is 4” of rain so we’ve seen areas that have gotten 4” or more with some areas 6”+. So the good news for Brazil is that the northern regions have gotten some rain. Unfortunately, the southern and central safrinha growing region has seen virtually no rain over the past 30-45 days. Parana, Mato Groso do Sul, and Goias is an area that is of extreme concern and the crop seems to be shrinking on a weekly basis.

Weekly Ethanol Production

Ethanol production increased from last week up to 952K barrels. We are well ahead of last year’s pace when we had total shutdowns within the U.S. Unfortunately, we’re still not back up to the pre-covid numbers that we saw in 2016, 2017, and 2018. We continue to hope restrictions will be lifted, driving miles will increase, and we can get back towards the levels that we were at pre-covid.

Weekly Stocks of Fuel Ethanol

Fuel ethanol up to 20.446 mil barrels so a decent increase from last week but we’re still well below last year and really anywhere we’ve been over the past 4-5 years. One of the reasons our ethanol stocks have been declining to very low levels is because the U.S. has shipped almost 76 mil gallons of ethanol to China in the first quarter. That would be Jan, Feb, and Mar quarter. That’s the most ethanol shipped to China since 2016. The bottom line with today’s ethanol report is that numbers came fairly close to expectations and it was not a primary driver of price direction. Weather is the primary driver right now.

Grain Market News

U.S. Low Temperatures: 5-4-21

These are yesterday morning’s lows. Lows in the 20’s in the northern Plains. Lows in the 20’s in the northern Plains. Lows in the 30’s in the northwestern belt. This certainly does not allow for a quick germination and emergence of the crop that is being planted. Today’s lows in the 30’s all the way down to eastern KS and western MO. Sioux City IA reported 29 degrees this morning. This tells us temperatures are 10-15, even 20 degrees below normal for this time of year.

U.S. Radar 12-45pm 5-5-21

On the U.S. Radar, rains in the northwestern belt. That is actually good news although most of the rain is being reported as 0.10-0.30”. It’s certainly welcomed but doesn’t do anything to change the overall drought conditions in the northwestern belt.

7-Day Observed Precipitation

Over the last week we’ve seen very good rains across the southern and eastern half of the corn and bean belt. Mostly drier in the northwestern belt although we did see a pretty good strip of rain from southern and eastern NE through portions of IA earlier this past weekend. Unfortunately, it was a fairly narrow strip. North and west of that line received virtually nothing and south and east of that line just a few 0.10”.

6-10 and 8-14 Day Forecast

The 6-10 and 8-14 days still looks cooler than desired. That’s not the kind of temperatures we’re looking for to get this crop off to a good start. At the same time, the 6-10 day has gone drier to below normal in northern MN, northern ND, and northern SD where it was above normal previously. There are still hints at above normal precipitation even in the northern Plains in the 8-14 days but we’ve seen that fairly consistently and that type of above normal precipitation has never evolved so we’ll continue to watch to see if the 8-14 day moves into the 6-10 day. Again, keep in mind the longer 8-14 day rainfall has not been evolving or moving into the short term forecast recently and that’s one of the reasons the market has been trending higher.

7-Day Precipitation Forecast

Today’s 7-day precipitation forecast was showing some 0.25-0.75” in southern MN to IA. That rain has been pushed further the south and to the west. Therefore, leaving a larger portion of IA, southern MN, and the Dakota’s drier than desired over the next week. This drier forecast in the noon run today allowed for corn and beans to push higher in the midday trade.

Root Zone Soil Moisture

This map looks at Grace-Based root zone soil moisture which is the top 3 feet of soil. This is based on satellite data and very complicated formulas but the indicator shows central and western IA extremely dry and that extends into portions of the Dakota’s, northern Plains and into southern Canada as well. It’s also worth noting portions of the lower Great Lakes area is seeing some dryness as well.

U.S. Drought Monitor

This map will be updated tomorrow but shows the same, dryness in western, northwestern IA into the northern Plains and it also shows the dryness in the lower Great Lakes region. It’s too different sets of data but both are showing us basically the same picture and that is extreme drought in the northern Plains into the southern Canadian Prairie and other areas of dryness as well.

July Corn Chart

Corn prices making another new high. This market has converted primarily to a weather market. That doesn’t mean demand isn’t important but weather is the driving factor. Less than ideal weather in the U.S. to get this crop started and extremely threatening weather in Brazil causing the corn market to move to new highs again today.

July Soybean Chart

Soybean prices have not pushed to new highs. The Brazilian weather is not a factor for soybeans. In fact, Brazil just completed its April exports with the largest export total on record for Brazil soybean shipments. And therefore, beans remain stuck in a sideways range, the same range established last week. Anything within this area is probably fair game in the near term.

July KC Wheat Chart

Wheat is also stuck within the range that was established last week. Wheat was able to follow corn higher today but it was not able to make a new high. Nonetheless, the long-term trend is up for wheat, it’s just that we’ve been consolidating over the last week.