Two topics have dominated trade recently: export/import developments and weather. For weather, the focus has been on the slow planting pace on corn, soybeans, and spring wheat. These are all behind their five-year averages and show no sign of catching up.

For trade it is was the breakdown in US.-Chinese trade talks, and then hints that maybe talks would resume. Trade is concerned if we lose China’s business we will see builds in commodity reserves – in grains, soybeans, and meats, as well.

The real issues with slow planting may not show up for several weeks, and possibly late into harvest. Excessive moisture has long been associated with fertilizer loss, and this year is unlikely to be much different. This is more of a factor for corn. While we can always reapply fertilizer if needed, this will raise the cost of production and further stress cash flows.

It is also possible that late planting will lead to issues when the crops finish out. It is likely we will see later maturity for the crops this year, and possibly push back harvest again. This tends to lead to quality issues, mainly test weight. While it is far too early for this to really impact the market, it is definitely worth keeping an eye on.

We are starting to see some alterations made to this year’s projected plantings. The private firm Informa has made a sizable change to corn plantings, lowering it to 90.6 million acres. This compares to the 92.79 million estimate the USDA published in March.

The group is predicting soybean plantings of 86.437 million acres, higher than the USDA projection of 84.617 million. Informa’s wheat number is closer to what the USDA predicted in March, with 45.28 million acres compared to the official number of 45.7 million. The USDA will revise its numbers at the end of June.

Technicals have also come into play in the market, mainly on corn and soybeans. Both commodities established contract lows on the July contracts following the May WASDE report, which turned into buying. This gave us sizable advances before futures ran into longstanding technical resistance.

This did not cause a retreat in the markets, though, which was viewed as a victory by technical traders.

While much of the attention in Brazil has been on soybean production, we are seeing more interest on corn. Officials are now predicting a record Brazilian corn crop this year, of 99.2 million metric tons. This compares to last year’s production of 80.7 million.

Near-perfect weather in April and to start May is behind the elevated production figure. Given global corn demand, this extra production will be needed, especially if the United States produces a short crop.

The U.S. attaché in China has lowered the country’s soybean demand forecast. China is now expected to import 84 million metric tons of soybeans this year, and 83 million in the 2019/20 marketing year.

This is concerning to analysts who had expected China’s soybean demand to approach 90 million tons this coming year. What is more of a factor is from where the soybeans will be sourced, especially with recent trade issues between China and the U.S.

While there has been a lot of focus on China’s demand recently, some attention should be placed on Mexico as well. This is more the case for corn, as there is a possibility of losing some if not most of the trade the U.S. does with Mexico. This is not just from trade policy differences, but from cheaper corn being offered out of South America. In the 2018 calendar year, Mexico imported 265 million bushels of U.S. corn.

Export sales for the week ending May 9 rebounded from the previous week. This was especially the case on corn, where commitments totaled 21.8 million bushels on old crop and 3.2 million on new crop. Soybean bookings were split, with 13.6 million bushels old and 11.1 million new crop.

Wheat sales reached 4.2 million bushels on old crop and 15.4 million on new crop. For the marketing year we are now 225 million bushels behind the year-ago sales pace on corn and 374 million behind on soybeans – but 78 million ahead on wheat.

It has been announced that for the first time in over a decade Australia will import wheat. This follows drought conditions that have cut into that country’s production. A drop in the global wheat market has also increased Australia’s interest in importing wheat.

This wheat will originate from Canada, as values have receded the most in that country, following the canola trade rift with China that will elevate wheat plantings.

Even with the elevated futures we have seen recently, little farmer selling has taken place. One reason for this is cash values remain below what most producers want or need to satisfy cash flows. Another is that more focus is on planting than marketing, which is a seasonal factor.

Basis still has a softer feel to it, though, as many buyers are opting to fade basis in anticipation of eventual movement.

Karl Setzer is Commodity Market Analyst for AgriVisor. His market commentary can be found on Twitter via @ksetzergrains

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.