Crop Prices and Weather Outlooks
Update for September 5th, 2019
Crop prices made a depressing return following the holiday weekend dropping December corn to new contract lows on the year. The overall attitude of the market is very negative right now and has been since the August 12th crop report. Technical traders are warning us that unless there is a drastic change in either the global demand for U.S. corn or in the weather, the DEC19 contract could fall into the $3.30 range before it finds support. There are some traders that feel that with the large supply of old crop corn still on the balance sheets prices could drop below $3.00 bushel if the USDA numbers are not revised to show a much smaller crop.
The USDA Crop Progress report raised its percentage of corn in the GD/EX category by 1% to 58% this week due to beneficial rains and mild temps. The results indicated that as of Sunday 81% of the corn was in the dough stage vs the average of 93% for this point of the season, 41% was dented vs the 63% average and 6% of the crop was mature vs the average of 13%. Looking at the major corn producing states:
Kansas is farthest along with 16% mature vs the average of 26%
Missouri is 6% vs 29%
Illinois is 2% vs 18%
Indiana is 1% vs 13%
Iowa, Nebraska and Ohio are each 1% vs the normal 7%
Minnesota is unmeasurable…0% vs average of 2%
South Dakota is also unmeasurable…0% vs the normal 6%
U.S. soybean shipments set an unofficial record of 164.8 million bushels for the month of August. This surpasses the previous record set in August of 2016 of 152.9 million bushels. Assuming these totals are correct, ending stocks should now be below 1 billion bushels. Washington and Beijing both moved forward with tariff increases this weekend. With all of the tit-for-tat retaliation the outlook for a trade deal any time soon looks bleak. As a result our Brazilian counterparts are reaping the rewards. Soybean prices in Brazil moved aggressively higher last week bringing the spot price at the Port of Paranagua in southern Brazil to approximately $9.86 per bushel and approximately $9.70 per bushel at the Port of Rio Grande in far southern Brazil. Dr. Cordonnier credits the higher soybean prices in part to the ongoing demand from China, domestic crushers competing for product and the tightening supply. It is very possible that Brazil could run out of soybeans before the new crop is harvested in January, especially if planting is delayed for any reason. The Chinese are also looking ahead to the new crop and are quickly booking cargos for February and March. Given the current demand for Brazilian soybeans I think most of us would expect to see an impressive increase in acres planted to soybeans this season but according to AgRural, soybean acres are likely to rise by only 1.1% in 2019-20, the smallest amount in over 10 years. This would expand soybean plantings to 89.7 million acres the smallest increase in 13 years.
The USDA made no adjustment to the soybean crop condition ratings this week leaving the GD/EX category at 55%. As of Sunday, September 1st, 96% of the crop had bloomed vs the 100% average, 86% was setting pods vs 96% on average. It’s quite significant to consider that as of September 1st 14% of the U.S. soybean crop had yet to begin setting pods! Looking at several of the major soybean production states:
Minnesota is running closest to normal and has 3% of pods yet to set vs 2% average.
Illinois has 16% yet to set pods vs normal of 3%
Indiana 24% left to set pods vs average of 3%
Iowa 10% left to go vs 4% average
Missouri 26% left vs 14% average
Nebraska 10% yet to set pods vs 2% normal
North Dakota 7% to go vs 1% normal
South Dakota 15% to set pods vs 3% average
Next week, September 12th, we will face yet another USDA report. One of the biggest questions right now is will the crop get the time it needs to reach full and optimal development before a major frost-freeze event? Until that is realized or some other major development occurs prices are likely to move sideways to lower nearby.
Last week Secretary of Agriculture Sonny Perdue told producers President Trump would be coming to the Corn Belt sometime this week to present to farmers a package designed to help the struggling ethanol and biofuels industries. In a tweet Sunday Trump said that details of the biofuel use boost package will be submitted and approved within two weeks. Biofuel promoters are urging the president to raise the 2020 blending requirements to offset the exemptions waiving some refineries from the mandates but as expected big oil is arguing against increases. The plan that is currently under consideration by Ag Secretary Perdue, EPA Administrator Andrew Wheeler and White House aides would add 875 million gallons to the refineries obligations, while significant only accounts for a third of the volume affected by the EPA waivers.
U.S./China trade talks have now been set for early October in Washington, according to China’s Ministry of Commerce. The Chinese ministry said, “Both sides agreed that they should work together and take practical actions to create good conditions for consultations.” “We’ll strive to achieve substantial progress during the 13th Sino-U.S. high-level negotiations in October.” In the meantime deputy level meetings will be held to lay the ground work for meaningful progress once the face to face talks resume next month.
DTN ran an interesting article on social media a few days ago regarding their fall weather forecast. While their outlook does not call for an early freeze in the central U.S. normal timing will not be sufficient with the late spring of 2019.
“The DTN fall weather forecast does not call for an early freeze in the central U.S. HOWEVER -- this season got started so late, that crops in practically the entire Midwest, along with the Northern and Central Plains, will need a later-than-average first freeze in order to have a chance at something approaching normal maturity.
How much of a lag depends on many factors -- prominently the planting date and subsequent local weather developments. Some areas may need just a few days' worth of a later-than-typical freeze. Others may need borderline-record-late occurrences of around two weeks or so delay for that first freeze. However, that may be a tall order. Its one thing to suggest that weather patterns at a given time are offering the potential for record-this or record-that; it's another thing to forecast that.
Another notable factor in this strange fall season ahead is this: In a typical year, the average first frost date of mid-October in Illinois, Indiana and Ohio doesn't even get attention. Why? Because, in most years, crops in the eastern Midwest have already reached maturity, dried down, and in many operations already been harvested. And so, we focus on the northern Midwest and the Northern Plains for freeze concern.
This year, that sanguine attitude is out of place. The wet spring and planting delays mean that many crops in the eastern Midwest will not achieve maturity until mid-October. That's right at the time of the average first freeze. Farther north, I have already heard of producers in North Dakota needing at least Oct. 1 to roll around before a freeze hits. That's right at the end of the average time frame of Sept. 21-30 for the first freeze.
The forecast over the next week to 10 days is mild, which means no early freeze is indicated. But, the season is not over with by any means. It is not an overstatement to say that, when it comes to the first season-ending freeze, that this is a year when "normal" means "early" for crops.”
Following a rather cool and wet weekend forecast the 6 to 10 day outlook shows warmer temps returning and above average precipitation through the second week of September.
After a bout of below average temperatures, the 6-10 day forecast shows warmer conditions moving back in and above-average precipitation through the second week of September.