Update for September 10th, 2020
Private crop estimates are all in ahead of the USDA September Crop Production and WASDE reports which will be released tomorrow, September 11th at 11:00 CST. Trade analysts look for a decline in U.S. new crop yields, production and carryout for both corn and soybeans. Below are breakdowns of the crop estimates from a few private firms:
Corn yield 178.3 bushels per acre
Total corn production 14.980 billion bushels
Soybean yield 51.9 bushels per acre
Total production 4.311 billion bushels
HIS Markit (Informa)
Corn yield 178.1 bushels per acre
Total corn production 14.961 billion bushels
Soybean yield 52.1 bushels per acre
Total soybean production 4.323 billion bushels
Corn yield 179.6 bushels per acre
Total corn production 15.085 billion bushels
Soybean yield 52.9 bushels per acre
Total soybean production 4.388 billion bushels
Source: StoneX, Reuters, USDA
The Iowa cooperative, Landus surveyed over 70 of their employees in 35 Iowa counties, between August 24th-26th regarding crop yield estimates for their specific area. Landus spokesman Tom Guinan reported an overall corn average of 188 bushels per acre and a soybean average of 55 bushels per acre. He also stated that he would not be surprised if these numbers actually came in lower following harvest due to the worsening drought conditions that occurred following the survey. Guinan also explained that they did not attempt to compute losses from the August derecho wind storm, “We decided with the derecho coming through, we should just avoid that area because there’s so many zeroes out there. What we were trying to figure out is how many bushels are going to be harvested. Well, if they’re not even going to harvest that field, let’s just avoid it. It kind of threw a kink into our plan but I think it made sense in the long run in what we ended up coming up with for data.”
Chinese demand for U.S. corn remains strong. Important corn production regions in northeastern China have been hit with 3 major typhoons in the last few weeks which have reportedly caused widespread crop damage. The areas of Heilongjiang and Jilin have had corn fields flattened by strong winds and heavy rainfall. Four years ago China ended a program that had paid farmers above market prices for their corn bushels, this led change convinced many farmers to reduce corn acres and instead have planted more acres to soybeans. For many years China held a massive supply of corn in inventory but last year due to increasing domestic demand coupled with reductions in corn acres, the country actually had a supply shortfall of -17 million tons which has pushed corn prices in the country significantly higher, now over +$8.50 per bushel. With producers across China now ramping back up their livestock and poultry production, traders now estimate the shortfall could increase to -25 million tons.
A soybean shortage in Brazil has reversed the typical seasonal marketing pattern. DTN analysts Todd Hultman told Brownfield that soybean prices are not bottoming out as harvest approaches as they normally would but instead they are now nearing the highs for the year. “Typically Brazil has plenty of soybean supplies coming off a big harvest as they had earlier this year, and we would expect them to keep exporting at least deeply into the fall. But that wasn’t the case. They actually ran low on supplies earlier than usual and that was signaled by the higher prices that we saw in Brazil in late July.” Hultman also stated that while Chinese purchases of U.S. soybeans remain strong, the country is still well below targets set in the Phase 1 trade agreement.
Due to the current shortage, soybean prices in Brazil are very strong which helps us with nearby sales but it also encourages Brazilian farmers to plant more acres to soybeans as the season approaches. Here in the U.S. our soybean prices have rallied the past few weeks and funds now hold a large long position. The USDA currently forecasts soybean ending stocks at 610 million bushels, if this total isn’t reduced to -500 million some traders fear the price risk premium may need to be adjusted lower.
Bloomberg and Reuters both have announced that President Trump has ordered the EPA to deny gap-year RFS waiver requests. The agency could act to reject up to 67 of those retroactive waiver requests as soon as this week. Meanwhile Politico has reported that the U.S. Department of Justice has decided not to appeal the decision of the 10th Circuit Court ruling to the U.S. Supreme Court which supports earlier reports that the Trump administration is siding with biofuel producers on the issue.
Temps across the Midwest are expected to return to above normal once again next week, following a wild week of precipitation, storms and temperature shifts. Labor Day weekend temperatures were above average for much of the country, in fact soaring temps reached over 100 degrees in Denver last Saturday and within a few days the area was put under a winter storm watch. Snow has fallen over the Rockies and higher elevations of the Central Plains this week but temps are expected to rebound quickly this weekend. The 6 to 10 day outlooks shown in the maps below, indicate the return to of warmer temps and below-normal precipitation once again.
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