This week’s USDA Crop Progress report saw a decrease in the Good to Excellent ratings in the 2023 US corn crop. Last week, the crop was rated at 69% good to excellent. This week, there was a 5% decrease in good to excellent ratings bringing it to 64%. Weather is the driving force behind the corn market this week. The corn belt is in need of good rain.

Updated weather models increased rain chances for much of the Corn Belt. Trade is optimistic these will take place but wanted some insurance in case they do not. The weekly drought map showed expansion across much of the US given the lack of rainfall.

Extreme heat is absent though and this is tempering reaction to the lack of rain at this time. Data shows the United States has only received 25% to 75% of normal rainfall over the past 60 days. Lower water levels are also likely to cause some logistic issues, mainly on the northern stretches of the Mississippi River. Sunday evening trade / Monday trade will reflect how much rain fell over the weekend and possibly set the tone for the next 10 to 15 days. 

Winter wheat harvest is underway across the American deep south. Texas is reported at 29% harvested, Oklahoma at 15% and Arkansas at 14%. Harvest is progressing through Oklahoma and yields are averaging from 30 to 40 bushels per acre, but some are crowding 50 bushels. High quality is also being reported. 82% of the wheat crop is in head vs the 5 year average of 81%.  The conditions of SRW belt of the US is rated favourable at 65% good to excellent and forecasted strong yields. (Illinois @ 65%, Indiana @75%, Michigan @ 53%, Ohio @ 64%). The national harvest progress was rated at 4% complete. In Ontario, we are in the T3 window to be applying fungicides. Test results show the application of T3 fungicide returns on average 5 bushels per acre. Applying fungicides at the correct time is a good investment into managing your wheat crops health and yields.

Soybeans were rated at 62% good to excellent in this weeks report. July soybeans broke above the 20-day moving average but failed to generate any major buying. Brazil soybean basis broke on heavier farmer selling due to currency exchange rates, and this widened the spread between Brazil and the US in term of sales offers, favouring Brazil as the cheaper seller. This spread had been narrowing, and while still historically wide, was hoped to generate more demand for US offers. There are now thoughts China’s overall demand is being underestimated and may top 100 mmt for the year. The USDA is currently projecting a 7% increase in Chinese imports.

USDA will release the June WASDE report today, June 9th at noon. Market expectations for ending stocks for the 2023/24 crop year are:

    Wheat 0.569 BBU

    Corn 2.254 BBU

    Soybeans 0.345 BBU

The Bank of Canada raised its benchmark interest rate a quarter point to 4.75%, after keeping interest rates steady over the past two rate announcements. “Stubborn inflation, robust consumer spending, tight labour market and a rebound in the housing market” reversed the “conditional pause” imposed in January. The last time Canadians experienced the prime rate of 4.75% was in May 2001.

All aspects of agriculture will feel the effects of higher interest rates. Grain elevators are experiencing tighter margins as they borrow money to fund margin calls and pay for historically high-priced grain. End users or processors are reluctant to take ownership of the physical receipt of commodities before processing in order to try and reduce their costs of owned inventory. The farmer is being squeezed with higher input prices and increased costs of financing equipment. Everyone is looking for more out the basis to cover the increased costs of operation, but the net result could be tighter margins for everyone across the board.