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UPDATE for September 8th, 2023

Further Decline in U.S. Crop Condition & SAM Crop Calendar

A considerable drop in overall crop-conditions were reported this week and further reductions are likely next Monday following much-above-normal temps earlier this week. USDA reduced the GD/EX corn rating from 56% down to 53% vs 54% last year. The current GD/EX rating is the lowest crop condition rating for this time of the year since 2012. Key production states across the Corn Belt are showing the most deterioration in overall conditions…

• Illinois and South Dakota both down 10%

• Missouri reduced by 9%

• Iowa, Minnesota and Wisconsin each reduced by 5%

• Nebraska fell 4%

• Indiana down 1%

It’s difficult to see how the U.S. can reach a national average yield of +175 when the top 3 corn producing states have crop conditions that are much lower than last year…

• Iowa is the #1 corn producing state in the nation. The latest crop conditions show the states GD/EX corn is down 17% from a year ago. (49% vs 66% in 2022)

• Illinois the #2 corn state is now rated 14% lower than this time last year. (57% GD/EX this year vs 71% in 2022)

• Minnesota’s GD/EX rating is now at 39% vs 62% last season. That rating is 23% lower than one year ago.

Unfortunately, there is concern that unreported FSA data may raise new-crop acres higher. Hopefully that fear is not realized, and the balance sheet can tighten up from here on out. If the USDA were to lower the estimated yield at some point down to 170 bushels and harvested acres stay unchanged at 86.3 million new crop production would fall by 440 million bushels and drop ending stocks below 1.8 billion. But for that to happen USDA also needs to leave demand estimates alone. Findings in next Tuesday USDA’s report are of particular importance. The market has been bouncing between $4.80 to $5.00 per bushel for the past month. This type of the pro-longed consolidation many times leads to a breakout in price in one direction or the other, next week's USDA report will be pivotal.

A decision from Biden’s administration regarding whether sustainable aviation fuel made from corn-based ethanol will qualify for subsidies under the new climate law will likely be pushed back until December. The administration has been split over the issue which has spurred lobbying from both sides. U.S. Farm Belt stakeholders see SAF as vital to the growth of the ethanol market. Environmental groups feel that the clearing of land to grow crops for fuel would be counterproductive in efforts to prevent global warming. The senior White House advisor on clean energy, John Podesta has been put in charge of finding a resolution. An official with the White House told Reuters that the administration SAF policy would like to include ethanol but, “we are trying to seek alignment with stakeholders on the question of modeling.” Requirements within the Inflation Reduction Act insist that SAF producers seeking tax credits must in turn “demonstrate with an approved scientific model that their fuel generates 50% less greenhouse gas emissions over its lifecycle than petroleum fuel.” (Reuters)

Since June below average rainfall all across the Midwest has caused water levels along the Mississippi River to drop causing shipping costs to rise. In St. Louis the barge spot rates as of August 29th were 49% higher than they were the previous week and are 42% higher than rates 1 year ago. According to data from the Department of Agriculture the current rate is 85% higher than the 3-year average. Unfortunate timing as corn and soybean harvest is getting underway across the Midwest. Last year the extremely low water level stranded over 2,000 barges, paralyzing traffic along the river which carries over 45% of all U.S. agricultural exports to port. The low water levels in some areas are causing delays of up to 2 days and require that vessels to be loaded 15% lighter than normal. (Feedstuffs)

As of last Thursday, Brazil farmers have planted 13% of the first corn crop for the 2023/2024 season up from 5% the prior week vs 9% in 2022. The Safrina corn crop is now 88% harvested vs last season when 98% had been completed at this time. Heavy rainfall that fell across areas of southern Brazil causing flooding in some regions is likely the reason for the delay. Brazil's crop production seasons can get confusing, a crop production calendar is shown in the following graph.

Today is the 25th consecutive day with little to no measurable precipitation in much of the region. The persistent hot and dry conditions have worsened the drought with some of the worst found in eastern Iowa where 25% of that region is now in extreme drought. Just 3 months ago less than 1% of the state was classified as having extreme drought. The September 5th Drought Monitor now finds 91% of the state is in a moderate to severe level of drought, 3 months ago that number was 42.7%.

Outlooks just out for the remainder of the month indicate the dry conditions won’t be improving any time soon. High pressure will be in control this weekend delivering some beautiful weather through the day on Sunday before clouds will begin to build later that day as a cold front makes its way in from the northwest. This will provide for a chance of scattered showers and isolated thunderstorms through early next week. The GFS model shows total rainfall potential through next Thursday but it’s early so totals may change.

The 6-to-10-day outlooks from the Climate Prediction Center show the continuation of dry conditions but this time introduces normal to below-normal temps during the period.

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