Hot Outlook and USDA Reports
Update for July 10th, 2020
Following last week’s USDA report Jerry Gulke, president of the Gulke Group told Farm Journal radio listeners, “I was surprised we would drop that much in corn acres. I thought we’d be down but dropping 5 million acres from what USDA printed at the end of March is big.” He feels that early spring corn prices convinced producers that were undecided to move acres away from the expenses of raising corn. “If you get prices too cheap in areas that are marginal, it is a pretty easy decision not to plant corn. There was just no reason to spend money, men and machinery on a crop that wouldn’t yield me a return. The market was saying don’t plant corn and we didn’t. Kudos to the farmers.” Gulke is now anxious for the USDA Supply and Demand estimate scheduled for today, as the large drop in acres should help reduce 2020-21 carryover that was estimated at 3.323 billion bushels last month. “If we use the current demand numbers, they could reduce that well below 3.3 billion bushels. If they would lower the national average yield by 4 bushels an acre to 174 BPA that takes us to a 2.3 billion bushel carryover. If it’s hot and dry next week, then it could get interesting and it will get interesting quickly. The market will then extrapolate what it thinks the worse-case analysis is and we’ll come up with a price.”
This morning I read something we all should keep in mind when we get discouraged. It’s been a long road to where we are right now but remember that 60 days ago things looked a lot different. NASDAQ is recovering well and is already setting new highs, oil prices have skyrocketed to over $40.00 and NOV soybeans are over $9.00. Regardless of the numbers in today’s report analysts feel that it will ultimately be the mid-day forecast updates that will dictate market direction.
USDA Supply and Demand projections for today’s 11:00 a.m. report.
Source: USDA, StoneX, Reuters
This week we saw a 2% reduction in the USDA GD/EX corn rating, soybeans were unchanged. It’s interesting to note some of the GD/EX ratings recorded in key corn growing states.
SOUTH DAKOTA 82%
Chinese/U.S. relations remain in the headlines. Two U.S. aircraft carriers, USS Ronald Reagan and USS Nimitz have been moved into the disputed waters of the South China Sea to hold military exercises. These exercises will overlap with drills the Chinese military is holding in the same region which has prompted Beijing into accusing the U.S. of having “ulterior motives”. Chinese state media reports Beijing stands ready to counter any challenge passed by the U.S. USS Nimitz Rear Admiral James Kirk reported, “They have seen us and we have seen them”. In addition, President Trump is considering a bill that would levy sanctions on some Chinese officials for actions Beijing has taken in Hong Kong. As these tensions rise China’s import projections for 2019-20 increase. Soybean import projections were raised by 3MMT to 94MMT (matching the projection made a month ago by the USDA), making note of the implementation of the Phase 1 trade deal with the U.S. and the strong crush demand. The Chinese Ag Ministry also increased the corn import forecast to 6MMT a 2MMT increase, they also referenced the Phase 1 agreement by noting that “implementation of the Sino-U.S. Phase 1 trade deal has accelerated, and China’s corn imports from the U.S. are expected to increase”.
Midwest crop conditions at the present time are mostly good but outlooks show the likelihood that hot and dry conditions will remain across the Corn Belt through corn pollination have put the market on edge. Most of the key corn and soybean growing regions saw little to no precipitation over the long 4th of July weekend and showers have been spotty this week. With the exception of parts of Missouri and eastern Kansas, areas that did receive rainfall over the weekend received totals that will do little to relieve crop stress. World Weather Inc. reports that extremely dry conditions will continue “in the Midwest from Nebraska and Kansas to Michigan and Ohio through Wednesday. Rain is expected to occur periodically during that period of time from the eastern Dakotas into Wisconsin where rainfall of 0.40 to 1.5 inches is expected with a few totals approaching 2.00 inches.” With temps remaining in the 80’s and 90’s throughout the day and night significant precipitation totals will be needed to counter evaporation. World Weather Inc. describes the current higher pressure ridge as “progressive” (moving in a West to East pattern) but sees the development of a larger, broad based ridge that could mean more hot/dry conditions for much the middle two thirds of the U.S. by late next week.
This weekend temperatures and dew points are expected to be significantly lower, enjoy because the outlook for the latter part of next week is hot! The first and second maps below show the jet stream pattern. The top shows where the jet stream will be positioned next Wednesday, the second shows the change which will bring up the heat from the southern half of the U.S.
The EURO model shows the core of the heat reaching across the Corn Belt. Serious heat conditions are possible as temperatures by next Saturday could read in the 90’s in northern areas and 100+ in areas to the south.
Adding to the high temperatures, dew points are expected in the upper 70’s to low 80’s.
With dew points of 70-80% and temperatures near 100 the heat index produced would rise to 110 to 118 degrees. This is a serious and potentially deadly combination that is rarely seen.
The final map below is from the Climate Prediction Center which also sees a significant threat developing. The map outlines their expectations for next weekend-July 17th through the 23rd.