New Rules From the EPA & Market Negativity

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Update for August 20th, 2021

We have seen a lot of negativity in the grain markets this week and with the abundance of sensitivity that the commodities seem to have right now there are several factors that could be attributed to the decline. It seems as though we never run out of estimates from analysts, commodities firms, forecast models or the USDA that seem to keep the market unsettled. For example, we’ve been hearing yield estimates all week from the Pro Farmer Crop Tour and right or wrong that data is now on record for the market to process. Recently “some analyst” predicted that the USDA will find an additional 1 to 2 million corn acres, possibly in the September 10th crop production report. In addition several weather models are in agreement and have turned wetter for the next several days in some of the regions that need moisture the most. In addition, the increase in Covid cases in the U.S. and China have the market and investors feeling uneasy about what the coming months may look like. All of these forecasts, estimates, and predictions matter, especially now.

China has been absent from the U.S. new crop corn market since May. Prior to that the Chinese had set a record pace for early commitments but since May there have not been any additional orders. So now the market has to wonder if this pause in buying is temporary or were the massive imports from 2020/21 a one-time thing. The Chinese have been active buyers of U.S. soybeans, making purchases now for 11 consecutive days. Great news until you consider that even with these latest purchases our bookings are only average and to reach the very aggressive new crop export target given by the USDA there needs to be much larger quantities purchased going forward.

The marketing year will end August 31st and as of now exports for both corn and soybeans are expected to finish the year below USDA forecasts. Weekly inspections of corn this summer have been averaging half of the total needed to meet the forecast. Corn loadings currently total 2.575 billion bushels, which is short of the 2.775 billion bushels necessary to meet the USDA projection.

Agriculture and biofuels groups have filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit regarding the sales of year-round E15. This week the National Corn Growers Association, Growth Energy and the Renewable Fuels Association petitioned the D.C. Circuit asking for a rehearing. The groups argue that the future of ethanol and our U.S. agriculture industry depends on the ability to increase ethanol consumption using blends above E10. In a statement the groups said, “If allowed to stand, this court’s decision to vacate EPA’s rulemaking to allow E15 to be sold year-round will have devastating consequences for the market expansion of homegrown biofuels.”

The EPA has announced their intention to rescind the use of the insecticide chlorpyrifos on food crops (fruit, food and vegetables) due to the neurological damage found in exposed farm workers and children that consume the food with its residue. This product is used along-side other widely used products as well, many of which will greatly affect several of the farming practices in use today and further ramp up production costs. The product is expected to be removed from the market in the next few months.

The latest U.S. Drought Monitor was released this week and is shown in the first map below. The second Drought Monitor map is also from this week but gives a detailed look at the drought situation across the Midwest and the graph on the right gives a comparison over time of the extent of the drought and the intensity.

Rains have moved over North and South Dakota as well as Nebraska this morning, with some areas receiving over an inch in the last 12 hours. This same system is moving to the east and is forecast to reach Iowa and Minnesota later today. Another system is expected to also move into North and South Dakota on Sunday and possibly make its way into western Iowa. Projected totals through next Thursday, August 26 are shown in the map from NOAA below.

CROP PROGRESS

Corn Dough - Selected States

[These 18 States planted 92% of the 2020 corn acreage]