Crop Progress. The pace of corn planting in the U.S. picked back up last week as reported in the Crop Progress for week #19. Corn planting is 71% complete, up from 47% the week before. This is just ahead of the long-term average for this week of the growing season.
Of the major corn producing states tracked for planting progress, Michigan and Pennsylvania are the most behind normal at -17%. Leading the pack of states that are ahead of normal for corn planting are Minnesota (+14%), South Dakota (+11%), and Iowa (+10%).
Grain Use. Reports related to the major grain use categories this week generally support increased grain consumption trends.
Ethanol production continues to run about 8% above last year and 11% above the five-year average. If the current production average extends to the end of the marketing year, about 5.577 billion bushels of grain will be used for fuel production.
Combined corn for fuel and sorghum food, seed, and industrial for the 2016/17 marketing year is 5.565 billion bushels, suggesting we may yet see some increase in the fuel category in supply and demand updates. The May 1 Grain Crushings report shows that we need about 465 million bushels per month to hit the projected use target, which so far this year has included about 10 million bushels of sorghum each month.
USDA lowered the corn feed and residual estimate for 2017/18 compared to 2016/17 by 75 million bushels in the May WASDE. This is the most difficult use category to track since it is the one that is not directly measured, as opposed to exports, fuel use, and other food, seed, and industrial uses.
Even though the feed use number is down for the new crop year, it is still the second highest since 2007 and livestock numbers are up. Energy feed per grain consuming animal unit is estimated at 3,881 pounds (including ddgs), just below the aveage since 1975 of 3,952 pounds. GCAUs are at another record high, 96.980 million units. The composition of that number is 35% cattle (an all-time low), 31% pork (an all-time high), and 33% poultry.
Corn export sales continue to run ahead of the pace needed to reach the marketing year target of 2.225 billion bushels. Cumulative sales as of May 11 were 2.079 billion, 93% of the projected total for the year.
Outside Markets. U.S. inflation continues to run at levels above the most recent 5- and 10-year averages. Prices increased again in April more than 2% above the same month a year ago for the fifth month in a row. The food index is up 0.5% and energy is up 9.3% over last year.
The Conference Board released the April Leading Economic Index this week. The LEI was up 0.3% to 126.9, a positive indicator for economic activity. The probability of recession increases when the index is down about 0.3% for three months in a row.
Rising inflation and positive economic growth indicators combined with a strong labor market may be all the argument the Federal Reserve needs to increase the federal funds rate in June. However, that rate, now at 0.75% to 1%, is expected to stay well below long-term averages for a considerable time yet to come.
Seasonality. The seasonal pattern for December corn from early March to early June is a sideways pattern. The 2017 contract is following suit. Normally, the highest price of the year is in June with below average prices from July to harvest. My marketing plan calls for having 40 to 60% of the 2017 crop priced by then.
2017 Feed Grain Marketing Plan. I am ready to price the next 20% of the 2017 crop. I will use basic technical tools to time this sale when they provide the signal that prices are turning lower. With favorable production prospects, the current level of futures prices offers me the opportunity to lock in a price that covers total costs.
May 26 – Cattle on Feed
June 9 – WASDE and Crop Production
June 23 – Cattle on Feed
June 29 – Hogs and Pigs
June 30 – Acreage; Grain Stocks