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Zawya
5 days ago
- Business
- Zawya
What to make of surprisingly low US crop ratings: Braun
(The opinions expressed here are those of the author, a market analyst for Reuters.) NAPERVILLE, Illinois - The U.S. corn crop has gotten off to a somewhat disappointing start in what is supposed to be a record producing season. Meanwhile, U.S. spring wheat is experiencing its second-worst start to the growing season in history after this year's plantings dropped to a 55-year low. What might these early figures mean for the growing season overall? How do they compare with past years? And where are the problem spots and near-term prospects for improvement? SHORT OF EXPECTATIONS The U.S. Department of Agriculture on Tuesday afternoon rated 68% of the U.S. corn crop in good-to-excellent (GE) condition in this season's initial rating, marking the lowest starting health since 2019. That was well below analysts' average estimate of 73% GE, though initial condition reports from the Crop Watch producers over the weekend averaged out to a six-year low, at least. A 68% GE is not all that bad. On average over the last three years, the initial U.S. corn score comes in around 72%. Additionally, the slower start may be explainable. The unanimous feedback from the Crop Watch producers was that it has been too cold, cloudy and rainy, and the plants are not growing quickly. Hail, frosts, wind, rain and even a period of excessive heat recently stressed crops in the western Corn Belt, which was reported by Crop Watchers. This showed up in USDA's data on Tuesday. Averaging initial corn conditions by state over the past three years, North Dakota and Ohio stand out. North Dakota at 48% GE is 24 percentage points below average and Ohio's 41% is 37 points below. Conditions in top producer Iowa are 4 percentage points ahead of normal, Illinois is 7 points behind, South Dakota is down 16 points, Nebraska is down 2 points and Minnesota is 4 points behind. OK OUTLOOK? Three factors may help ease any concerns about current U.S. corn crop health. The corn crop is only two-thirds emerged nationally, a lower-than-usual portion to coincide with the first condition scores. This allows for some play in the near-term figures, as newly emerged crops, if in good shape, could boost the overall score next week. Although not necessarily unusual, less than 40% of corn in Ohio and North Dakota was emerged as of Sunday, possibly allowing for future improvement. All Crop Watch producers last weekend expressed the dire need for heat and sun, and that should start arriving over the weekend after this week finishes out on the cooler, cloudy side. The pattern might not necessarily be long-lasting, but even a short, warm, sunny spell in early June can go a long way for early crop growth. U.S. corn was initially rated 65% GE in 2017, and calculations at the time pointed to near or below-trend yield probabilities. This caused the market to misjudge the crop potential all year, and the 2017 corn crop achieved a new record yield. The 2017 crop was rated 60% GE by the end of July, not too huge of a change from the initial. So even though 60% would not be considered stellar by itself, the lack of large rating swings that season may have been telling. WHEAT WOES U.S. spring wheat was rated 45% GE as of Sunday, tied with 2021 as the second-lowest initial rating over the 40-year history. The worst was 34% in 1988. Those two years are bad company, as they featured well-below-trend U.S. spring wheat yields as both seasons included drought. The 2025 crop is already starting in the hole as U.S. farmers intend to plant their smallest spring wheat area since 1970. Some 60% of U.S. spring wheat was emerged by Sunday, comparable to 66% on the same date in 2021. North Dakota, which produces half of the U.S. spring wheat crop, must remain on watch as only 37% of the wheat there is GE and 26% is considered poor or very poor. Recent cold and wet weather has battered the young wheat crop, so the coming flip to better weather may offer improvement opportunities. Market analysts had expected the initial spring wheat conditions to come in at 71% GE, so the result was much more shocking than the one for corn. But the lighter figures for both certainly set up the potential for market scares this summer if an unfavorable weather pattern were to set in. Karen Braun is a market analyst for Reuters. Views expressed above are her own. (Writing by Karen Braun Editing by Matthew Lewis)
Zawya
19-05-2025
- Business
- Zawya
Funds get short CBOT corn but ink record bullish oilshare bets: Braun
(The opinions expressed here are those of the author, a market analyst for Reuters.) NAPERVILLE, Illinois - Speculators sold significantly more Chicago corn than expected last week, establishing their first bearish stance on the yellow grain in nearly seven months. However, funds' massive CBOT soybean meal short combined with their building bullish soybean oil bets left them with record oil optimism in relation to meal. CBOT July corn hit seven-month lows in the week ended May 13, easing nearly 3%. U.S. corn planting has been moving along without a hitch, and funds were expected to have gotten short heading into last Monday's reports from the U.S. Department of Agriculture. They certainly emerged as bears from that data release, which placed 2025-26 U.S. corn supplies well below analysts' expectations but up 27% from the current year. In the week ended May 13, money managers were net sellers of nearly 99,000 CBOT corn futures and options contracts, resulting in a net short of 84,976 contracts. That is their first net short in corn and their most bearish view since October. That is a stark contrast from early February, when funds' net long hit a three-year high of 364,217 contracts. They have been net sellers of corn in 12 of the 14 weeks since, largely driven by U.S. trade policy jitters and the anticipation of a record U.S. corn crop. July corn futures remained steady at the end of last week, but December futures on Friday sank to five-month lows. Money managers extended their net short in CBOT wheat futures and options through May 13 to 126,895 contracts, nearly their most bearish wheat view in more than seven years. Most-active CBOT wheat futures on May 13 sank to their lowest levels since August 2020 as USDA pegged global wheat supplies to rise slightly into 2026 from the current levels. July wheat futures rose 1.5% over the last three sessions as U.S. wheat exporters made some of their largest sales in years, but traders have also noted improving U.S. crop conditions. SOYBEANS AND PRODUCTS In the week ended May 13, money managers extended their net long in CBOT soybean oil futures and options to a six-month high of 67,432 contracts, up nearly 11,000 on the week. Most-active futures rose 6.5% on the week before reaching 18-month highs on Wednesday, driven by U.S. lawmakers' proposed extension of the clean fuel tax credit (45Z) through 2031. However, futures plunged 6.5% over the last two sessions including a limit-down move on Thursday, when rumors circulated that next year's target for U.S. renewable diesel volumes could be much lower than previously expected. In the background, trade disparities in soybean product trade had been on the rise. CBOT oilshare, which measures soyoil's share of value in the soy products, recently hit the highest levels since late 2022. But speculators' bullishness in the oilshare last week reached an all-time high, possibly suggesting one or both of their product positions have been too extreme. In the week ended May 13, money managers slightly trimmed their 100,000-contract-plus net short in CBOT soybean meal futures and options from the previous week's record high. But that was offset by funds' net buying in soyoil, boosting their net long in the CBOT oilshare to 170,177 contracts. The pre-2025 high was 144,631. CBOT soybeans both in the week ended May 13 and in the following sessions moved directionally with soybean oil. Money managers extended their net long in CBOT soybean futures and options to a three-month high of 38,407 contracts through May 13, up more than 16,000 on the week. Traders in the week ahead will be watching U.S. weather forecasts for the early establishment of the corn and soybean crops. But they also must keep a close eye on any potential developments out of Washington, especially pertaining to trade policy or biofuel mandates, both of which have recently jolted futures markets. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
