UPDATE for September 1st, 2023
Extreme Temps and Dry Conditions but Prices Continue to Decline
Extreme temps across the U.S. Corn Belt, developing weather concerns in Brazil, an escalating war in Ukraine, strong corn prices in China and crude oil above $80. Each valid reasons to push prices higher but that isn’t happening. The bull that ran prices higher has run out of stream and the bear is in control. The DEC23 corn contract has remained within the same price range between $4.73 and $5.20 per bushel all last month. It appears as though the market either doubts that the extended hot and dry conditions we are having will have a major impact on the final yield or that even if there is a significant yield drag an adjustment in “planted acres” could potentially offset that loss. Add to that poor export demand and concerns that the USDA may reduce feed and residual demand in the late September report.
Last week this newsletter included state by state Pro Farmer yield estimate data. The following map shows the comparison (where available) between Pro Farmer’s corn yield estimate, the current USDA projections as well as the final 2022 USDA yield results by state.
Soybean prices have struggled this week even with our unfavorable conditions. Last week Pro Farmer estimated the U.S. average soybean yield at 49.7 bushels per acre vs the USDA estimate of 50.9 which equates to a new-crop balance sheet of 245 million bushels. This is much tighter than it is for corn, and leaves little room for the crop to get smaller like the Pro Farmer projects but like corn there is concern that updated FSA data may find more planted soybean acres than expected.
August is known to be the month that the soybean crop is made so the fact that prices have floundered is rather surprising considering the unfavorable weather we have had and are forecast to see over the next two weeks. There is a lot of unknowns right now, like how much damage is occurring to the crop and how much yield we may be losing each and every day the extreme heat and dry conditions persist. Usually, when the market is “uncertain” about how yields are being affected is when the most risk-premium is added…usually. The following map compares estimated soybean yields by state from Pro Farmer and the USDA as well as the 2022 final yield for each.
Ethanol and biodiesel production has brought economic growth to all regions of rural America. The future for biofuels is evolving and according to Rabobank the production of sustainable aviation fuel (SAF) will be a large component in the future of the biofuels industry. Rabobank’s Senior Grains and Oilseeds Analyst Owen Wagner wrote a report titled, “The Future for Sustainable Aviation Fuels” where he explains how SAF are “absolutely” promising for the aviation industry and is coming onto the scene at an interesting time for biofuels. Currently SAF plants in the U.S. produce around 25 million gallons each year with production expected to grow to 2.2 billion gallons a year by 2026. If SAF production is able to reach its full potential it would be the equivalent to 15 billion pounds of soy oil demand and 1.8 billion bushels of corn demand. Rabobank expects challenges along the way such as limits to farmland production and the concern that synthetic fuels could replace the biofuels for planes at some point. (DTN)
The U.S. is in for a sizzling Labor Day weekend which starts today. The start to September will be a continuation of the extremes we seen all summer. The graph below shows the daily high and low temperatures recorded during the month of August in Waterloo, Iowa. The high temp hit 105 degrees on August 23rd (the first time in over a decade) then just over a week later the low temp for the month was recorded at 47 degrees.
August also saw a large variation in rainfall totals with western and southern Iowa seeing the highest amounts of 6 to 9 inches. Precipitation totals gradually drop off from west to east across the northern tier of counties with totals of less than 1 inch in far northeastern Iowa. The monthly rainfall departures from normal are indicated in the second map.
A ridge is building that will bring southerly winds back into the pattern which will push temps back into the upper 90’s. The next opportunity for rainfall does not appear likely until at least next Tuesday night or Wednesday as high pressure will begin to expand through the Midwest. Thankfully this round of hot temps will not produce the incredible heat indexes we had a week ago as moisture is lacking this time so humidity levels will be much more comfortable.
3 maps follow:
1st map shows the expected rainfall totals through next Thursday.
2nd map shows how warm temps will be compared to typical temperatures through September 7th.
3rd map shows how the warmer than normal temps are expected to hang around through at least the 15th as well.
