Trade is starting to focus on the upcoming May supply and demand report which is one of the most watched of the year. This is because the May release contains the first official look at new crop balance sheets. We have seen several estimates on new crop balance sheets already, mainly the USDA’s Ag Outlook Forum and the Baseline data. May balance sheets will use the prospective plantings numbers and trend yields for production, and while these will be altered as the year progresses, they tend to receive considerable attention. 

We will also see the USDA release demand numbers for the 2023/24 marketing year, and these can be just as influential for trade as the production side. Heading into this report more attention will fall on soybean balance sheets as these are expected to remain tight for at least another year. Most balance sheets estimates see soybean reserves holding at a rationing level even if the US crop is slightly larger than last year. At the present time US soybean ending stocks could increase 50% and still not be overly negative for the complex. The same thoughts are starting to develop in the wheat market. Corn is less concerning as trade is forecasting a record crop this year and steady demand. 

One of the main functions of the commodity market is to determine how much risk premium needs to be added to futures. There is a wide range of topics that can generate the need for risk premium although weather is at the top of the list. This is especially true at this time of the year when the planting and growing season gets underway in the United States. Weather conditions across the United States have been quite variable recently, with some regions of the US seeing drought while others are experiencing flooding conditions. 

The most drought concern right now is in the Lower Plains where even after recent rains, soils remain short of moisture. This has been an underlying source of support for wheat for several months. Dry conditions are less supportive for corn or soybeans at this time of year as they tend to lead to fast planting rates and can elevate acres. The weather concern on these crops is in the Upper Plains where snow melt will likely cause flooding in production areas and can easily delay or even prevent plantings. 

We are now starting to see the addition of risk premium in the futures market, with most on soybeans as that is the commodity with the tightest stocks to use and the one we need the most production on. 

A lack of storage is becoming more of a factor in Brazil. Elevators in Brazil were quick to fill on soybeans this year as yields have been record sized in many areas. Now farmers are starting to bring in its first corn crop which is compounding the issue. As a result, we are hearing of terminals having to turn away corn deliveries. This may become an even greater issue in Brazil in a few months when the Safrinha harvest gets underway. 

A result of this storage situation in Brazil is we could see an elevated use of temporary facilities. This may include the use of storage bags. The problem with temporary storage use is that it can lead to issues later on, mainly quality losses. If this happens in Brazil, it could bring the US export business later in the year. Any hint of lower quality corn will also pressure its value, which would limit what the US could sell corn for. 

The United States had a sizable increase in demand for E-15 fuel in 2022. Data shows the United States had record sales of 1.02 billion gallons for 2022, a yearly increase of 26%. This was credited to the lifting of blending restrictions that allowed the fuel to be used year around. E-15 demand will likely slip in 2023 as there is no indication the blending limitations will again be lifted. Renewable fuel industry officials claim this data supports the higher blend rate they have been pushing for.  

The April cattle on feed report surprisingly showed a larger cattle inventory than expected, but still lower numbers than a year ago. The US had 11.6 million head of cattle on feed on April 1st, 4% less than a year ago. The greatest decline was to steers where the count was down 6% at 7.12 million head. March placements were higher than expected at 1.99 million head, 99% of a year ago. March marketings were also 99% of last year at 1.98 million head. 

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