The USDA came with a 13.76 billion-bushel-corn crop, more than 250 million bushels below the average trade estimate in the August crop production report.
It reduced corn exports by 25 mb and feed usage by 50 mb to get a 1.837 bb carryover estimate, down 122 mb from last month.
Some things went wrong last spring that you just can’t fix. Some corn is just pollinating so it needs a late fall to mature.
Commercials have been buying the market as funds sold and have been tightening the new crop basis. Farmers have not sold much of this crop, have the storage capacity and financial where-with-all to put it away.
ISU climatologist, Elwynn Taylor, has estimated that the most likely final yield result will be 148 to 150 bushels per acre.
USDA moved in his direction reducing its yield estimate to 154.4 bpa. Depending on the kind of fall that we get, this estimate is still not unrealistic.
The report puts some uncertainty back into the market taking it away from the bears where funds have a record short position to eventually cover.
Farmers have no interest in selling corn for recent low prices and as stated end-users are still working off higher priced old crop stocks inventory for at least another month or longer before they can get to the cheaper stuff.
Some of them are going to have to pay up yet for corn as it will not just spill into their laps. Iowa in particular, given this USDA production estimate, will be a corn deficit state.
USDA left its ethanol corn consumption estimate at 4.9 bb. Given $4 corn and $100 barrel oil, only the blend wall is stopping ethanol corn usage from becoming much larger.
Ethanol plants can run full out if they can find a market for the ethanol. The Renewable Fuels Standard is not relevant until the blend wall comes down.
Vice versa, if the blend wall stays up the RFS will come down. The Environmental Protection Agency will reduce it without any input from Congress.
The USDA reduced soybean harvested acreage about 500,000 acres, 90,000 in Minnesota.
It didn’t reduce corn acres at all. I have seen private estimates that close to 4 million acres have been lost. That means that they have to take corn and soybean acreage down by almost 3.5 mb.
I don’t believe that late crops and cool temps will make heavy ear weights and high pod counts. I believe that most of the lost acreage was soybeans, but I don’t know that it will be reported under crop insurance claims that way.
Farmers can claim the highest corn acreage of the prior three years as prevented planted corn which gives higher indemnity coverage.
A crop insurance adjuster in north central Iowa was working on a list of claims that he said there was no way that he could ever get through.
Anyone driving I-90, I-35 or U.S. Highway 20 can see tens of thousands of acres of prevented planting just through the windshield and no one who has flown over that region has landed not believing that a huge acreage adjustment is yet to be made. It is bigger than just a backyard.
USDA lowered its estimate for soybean yields 1.9 bpa to 42.6 bpa and it hasn’t even evaluated that crop in the field yet. They have to have pods to be able to count them.
They talk about the cool summer benefiting soybean yields, but we put things in the refrigerator to keep them from growing and the cool/dry summer has delayed late-planted soybeans even more. They have to have pods in August to have something to fill.
It will be September weather more than August that will determine if reduced yield potential can be achieved. Again, late-June planted soybeans, of which there are millions of acres this year, have 59 percent yield potential in a normal growing season.
Neither temps nor rainfall has been normal.
Frankly, I still think we need some much improved weather ahead this fall to avoid what in my observation looks like a crop disaster pending in soybeans in Iowa, Minnesota and Wisconsin.
USDA now looks for a 3.255 bb soybean crop, and a 220 mb carryover.
Unless the frost date holds off this fall until Halloween I still think that carryover estimate is an illusion. The trade is “beared-up” on the anticipated increase in South American soybean acreage, but has not recognized that the 90-day SOI is now signaling a La Nina, which is not good for yield prospects for the next 10 months around the world.
Efforts to date from soybean producers around the world to bury China in soybeans has yet to happen, while China continues to boost consumption despite all the overbearing warnings of slowing gross national product.
China will again buy all our soybeans right down to pipeline supply just as it has been.
For what it is worth the 30-day NOAA temperature forecast for the month of September is for below normal temps for the Corn Belt. We almost saw isolated instances of frost this summer on cool mornings at the Corn Belt’s fringe.
There have been mornings when it already felt like fall. In the case of corn, further acreage adjustment and a September frost date would reduce the carryover, but not threaten it.
Corn stocks should not be as tight next year.
In the case of soybeans, adjusted acreage and a September frost could eliminate the projected carryover.
That is the reason for the respective strength in the soybean market over corn.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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