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Midwest Growers Swiftly Accelerate Corn and Soybean Planting

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After cooler conditions that persisted into late spring, growers across the Midwest are speeding up corn and soybean planting. Progress is well ahead of the historic pace in Illinois and Indiana, while planting is just below or at the five-year average in states like Minnesota and Ohio.

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USDA Reports Show Planting Surge Amid Favorable Weather

Favorable weather is also promoting planting progress in other parts of the country, with total corn planting progress reaching 65% complete as of May 14, ahead of the five-year average of 58%. Soybean progress also reached 49%, compared to an average of 35% over the past five years.

But the warmer weather currently driving planting could harm crops later. The US Drought Monitor shows extreme and exceptional drought conditions moving into parts of Nebraska, Kansas, Oklahoma, and Texas. Pockets of moderate and even extreme drought are also being monitored in parts of Minnesota and the I States.

For now, estimates for the new crop year look relatively healthy. USDA pegged US corn yield estimates at 181.5 bushels per acre and total production at 15.265 billion bushels. Soybean yields were forecast at 52.0 bushels per acre, with production expected to reach 4.510 billion bushels per acre. Old-crop and new-crop ending stock numbers also fell largely within expectations.

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USDA Reports Show Pressure Put on Brazilian Production

But conditions are far less favorable in Argentina amid severe drought conditions. USDA pegged the country’s 2022-23 corn production at 37 million metric tons, down 26% from the start of the year. Similarly, soy production has dwindled to 27 million metric tons.

That could put pressure on grain supplies in Brazil, even as the country continues with a potentially record-breaking harvest. Brazilian production is expected to hit 130 million metric tons of corn and 155 million metric tons of soybeans, per the latest WASDE report.

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Jobless Claims Lead to Fear of Economic Recession

While weather – both in the US and globally – remain watch factors in the months ahead, economic factors are also stirring up anxiety in markets. The pace of inflation has cooled somewhat, but American consumers are still paying more for most products. At the same time, jobless claims are on the rise. According to a report by Bloomberg, the number of high-income earners collecting unemployment benefits has jumped more than six-fold in the last year.

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Those factors, along with recent bank failures, are fueling fears of an economic recession. Analysts suggest the US could dip into a recession during the second half of the year, though the economy has remained relatively resilient.

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Uncertainty Hits Corn Futures to New Lows, Soybean Market Holds Steady Amidst Managed Money Shifts

Amid the uncertainty, July and December corn futures found their lowest points in more than a year. Soybean meal futures also dipped into ranges not seen since January but have found more support than the corn market for the time being.

Managed money is leading the break in corn, as traders move from net long to net short for the first time in nearly three years. Brazil’s record corn crop and expectations of an equally impressive production in the US later this year have many expecting an end to the lean corn balance sheet both domestically and globally. There are plenty of cost-effective ways to manage upside risk at these lows while leaving room to benefit from further breaks in the market.

Market Sentiment Reflects in Basis as Sales to China Decline and Midwest Corn Bids Cool Off

Basis is beginning to reflect a similar sentiment as cancelled sales to China stack up and old-crop bids cool off in the Midwest. New-crop basis numbers are average in the heart of the Corn Belt and favorable weather in the forecast should maintain that tone for the foreseeable future, with a chance to work lower if the current USDA projected ending stocks are realized.

Protein basis has taken on a softer tone as well, with Canadian canola inventories now more than double what had been anticipated as recently as December. Continued addition of new crush capacity for both soy and canola across the continent will keep a ceiling on cash markets and is already driving new-crop canola offers back into historically average ranges.

Soybean Meal Shows Resilience Amid Decline

Soybean meal is starting to trend in the same direction, though a lean US ending stocks number seems to be slowing the rate of decline relative to canola. While today’s offers are some of the best we’ve seen in a year or two, the potential for further improvement still exists again as new capacity comes online, and especially later in the feed year should South America have a good crop in February of 2024.

Dairy Producers Find Potential Relief as Feed Costs Ease Amid Grain Market Pressure

As grain markets remain under pressure, dairy producers are keeping close eyes on feed costs and farm margins. Dairy Margin Coverage estimates by Ever.Ag peg feed costs at roughly $12.10 per hundredweight during the second half of the year, down from $14.50 during the first half. With milk prices expected to remain relatively stable, bottom lines could benefit, with current estimates pegging second-half margins at $9.40 per hundredweight, compared to $6.40 during the first half.

Protect Your Downside

Given current market conditions, the Ever.Ag Feed Foundations Team recommends putting strategies in place to protect your downside. If you’re locking in high prices, consider buying inexpensive puts underneath. Please contact Jordan Miller or Pat Kahle who can direct your questions to the appropriate advisor to discuss specific strategies.

Jordan Miller: 419-692-3206 ext. 1043

Pat Kahle: 517-260-8295 or P[email protected]

This monthly report is brought to you by Ever.Ag’s Feed Foundations Team. The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources to be reliable, however, no independent verification has been made. By law we must state the information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.

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