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So Much For a Weather Rally & Status of the New COVID-19 Relief Aid

Update for July 29th, 2020


It seems as though every time we finally have a bullish story that is moving prices higher some bearish news quickly emerges. A couple of weeks ago the outlook for corn prices seemed to be improving. The U.S. Dollar value had fallen to near 2 year lows-making exports from the U.S. more attractive, we saw several large Chinese purchases of U.S. ag products and the long-range forecast showed that the hot/dry weather we were having was likely going to stay around for several weeks. Well, the long-range weather forecasts were way-off which really set the downturn in motion. Since the beginning of this week we have seen very cooperative weather across a large portion of the country and the long-range outlook calls for cooler temps through at least the first week of August. The favorable weather over the past week also raised the USDA’s GD/EX crop condition ratings for corn by 3% on Monday, up to 72%. This improvement in crop conditions also increases the odds that the national yield could reach a record +180 bushels per acre. All of this along with a lingering weaker demand for ethanol makes the argument for a tighter balance sheet much more difficult. Until we can move beyond the current bearish weather outlooks and the talk of record U.S. corn yields the cap is likely to remain on prices.


Some of the states showing the largest increases in the GD/EX corn ratings:

  • Illinois-jumped up by +11% to 74% GD/EX this compares to 44% in 2019

  • Nebraska-improved by +9% to 75% GD/EX which is the same as a year ago

  • Indiana-up by +6% from a week ago to 65% GD/EX compared to 36% last year.

  • Ohio-saw an increase of +6% to 49% GD/EX vs 34% in 2019.

  • Kansas-increased by +6% to 60% GD/EX, 3% higher than last year.

  • South Dakota-improved by +2% to 86% vs 61% a year ago.

  • Minnesota-received a +1% bump in GD/EX ratings to 84% vs 56% in 2019.

A few of the states that received a reduction in GD/EX ratings:

  • Texas-fell by -8% to 44% GD/EX vs 69% last year.

  • Pennsylvania-is down -6% to 50% GD/EX vs 80% in 2019.

  • TOP CORN GROWING STATE-IOWA-fell by -3% to 77% GD/EX vs 65% a year ago.

Soybean yields are also expected to increase with the very cooperative weather. The USDA also raised the soybean crop condition GD/EX rating by 3% this week up to 72% vs 54% last year.


A few of the states showing impressive improvements:

  • Kansas-increased GD/EX ratings by +10% to 67% this week vs 50% in 2019.

  • Michigan-GD/EX rating rose by +10% to 66% vs 41% last year.

  • Illinois-was up by +9% to 76% GD/EX vs 44% a year ago.

  • Nebraska-also up by +9% to 80% GD/EX vs 74% last year.

  • Indiana-was raised by +5% to 65% GD/EX vs 35% in 2019.

  • Minnesota-GD/EX ratings were boosted by +4% to 84% vs 60% a year ago.

There were also several states showing declines ranging from -5% to -3% lower than the previous week. The top soybean state of IOWA fell by -3% to 76% GD/EX compared to 62% in 2019.


Top trade negotiators for the U.S. and China are still planning to meet face to face in August as part of the “meeting” clause, but tensions may interfere. The South China Morning Post (SCMP) wrote that the meeting between the top trade negotiators Vice-Premier Liu He of China and Robert Lighthizer from the U.S., would be “an important inflection point” to help each side assess progress from the Phase 1 trade deal. With the current level of tension it’s unclear if the two will actually meet in person stating, “There is less of an appetite for engagement at the moment”. The two sides could agree that the telephone conversation held between the lead negotiators on May 8th satisfies the meeting clause in the trade agreement. One Chinese government advisor said that he does not foresee a new round of trade talks taking place in August due to the current unfavorable state of relations, he said “The trade topic has lost weight in the overall China/U.S. relationship”. A meeting regarding economic and trade issues was held last Thursday between Chinese officials that are responsible to oversee these matters. The SCMP reported that one of the topics the group discussed was how to increase imports, one person involved with the meeting was quoted, “We have already bought what we could (from the U.S.) so any additional purchases would create difficulties.”


Before getting too discouraged though consider the table shown below that has been circulating amongst traders. This chart developed by Karen Braun includes July sales for 7 years including 2020. It’s hard to ignore 2020 exports totals that are many times higher than previous years. So while we worry about the status of the U.S./China relationship and what it may mean for Phase 1 agreement, we also have been hearing from several sources that China needs U.S. corn and soybeans because they simply do not have enough.

Several recent reports project an increase soybean production in Brazil during the 2020-21 growing season. Ag Consultancy Arc Mercosul expects farmers to expand planted acres at the highest rate since 2014-15 partially due to their strong financial position along with their ongoing impressive soybean exports to China. The Consultancy expects producers will plant 94.9 million acres of soybeans in the upcoming season, a 3.8% increase from last year. Pro Farmer Crop Consultant Dr. Michael Cordonnier projects soybean acres will increase by 4.2% to 95.1 million acres, raising potential production to 131 MMT. Cordonnier says that the expansion could be limited by a few factors:

  • Cattle prices in Brazil are strong so livestock producers may not be anxious to convert pastures to corn and soybean acres.

  • The value of the U.S. Dollar has recently slipped to near 2 year lows. Brazilian currency has been strengthening compared to the Dollar, which could lead to lower soybean prices out of the U.S. reducing demand for Brazilian soybeans.

Cordonnier noted that Brazilian corn producers had a very good season as well with record high domestic corn prices. He expects corn acres could increase by 2.3% to 46.6 million acres in the 2020-21 growing season. If dry weather persists in August and September due to the developing La Niña weather pattern, the U.S. Dollar remains weak and ethanol demand weighs down corn prices all of the current plans for expansion could end.


U.S. Treasury Secretary Steven Mnuchin told reporters yesterday, following a meeting with House Speaker Nancy Pelosi (D-CA) that, “We’re still very far apart on a lot of issues. I do think there is a subset of issues that we do agree on, but overall we’re far from an agreement.” Aid package areas they could agree upon included a second round of the Paycheck Protection Program, funding to help schools (universities) safely reopen and worker retention tax credits for hard hit businesses. Mnuchin said there are several issues that are going to be much more challenging to negotiate and reach a compromise on including unemployment insurance as well as state and local assistance and liability protections for businesses. Senate Majority Leader Mitch McConnell (R-KY) told CNBC that the Senate will not pass a relief bill that does not include liability protections for businesses and schools as they begin to reopen but added they are willing to compromise on some other points.


Renewable Fuels Association President and CEO Geoff Cooper is concerned that the current language in the Senate version of the bill isn’t clear enough on how ethanol producers would benefit from the latest relief package. Currently the bill includes “agricultural processors” but Cooper does not believe that this wording is specific enough to guarantee inclusion in the distribution of aid. He explained, “What is clear is that USDA is seeking unambiguous direction from Congress with regard to distributing assistance for ethanol producers.” The American Coalition of Ethanol CEO Brian Jennings stated that while he thinks that ethanol producers would fall within the definition of “processors” in this proposal, he believes that Congress needs to be much more specific in the language because as it is currently written it, “still leaves discretion to USDA, which so far failed to use the authority to support our industry”.


The 6 to 10 day outlooks from NOAA includes a considerably large bulls-eye of below-normal temps right in the heart of the nation’s Corn Belt. Rainfall for much of this same region is expected to be below normal during this same period.


Looking ahead at the 8 to 14 day outlook from NOAA we see a slight reduction in the area expected to see below normal temps during this 7 day period but at this time there are no signs of crop stressing heat on the horizon. A large portion of the Corn Belt is forecast to shift to above normal precipitation during this same 7- day time period.



Temperature Probability

Precipitation Probability

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