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BRIAN HOOPS

By Staff | Aug 21, 2015

New yield forecast

Daily infrared images of U.S. farmland captured by satellite indicate worsening conditions for this year’s U.S. corn crop, according to one data-analysis company.

Domestic corn production will be 13.34 billion bushels, Descartes Labs forecast. That’s down 6.4 percent from last year and also less than the 13.53 billion-bushel forecast by the US DA in July.

National corn yields are seen at 164.9 bushels an acre, down from its 168-bushel forecast last month, the Los Alamos, New Mexico-based company said. That’s also lower than the

USDA forecast of 166.8 bushels from last month.

Problems caused by excessive rain from Nebraska to Ohio in June and July are clearly seen on computer-generated maps, said Steven Brumby, chief technology

officer. “The numbers have moved, and more than normal this year.

“The full effect of the wet weather has yet to make itself known. The yield is probably headed lower.”

A theoretical physicist, Brumby is a co-founder of the company, which started as a project at the Los Alamos National Laboratory in 2007.

Descartes analyzes images showing farmland to a resolution of 1/5 of an acre (0.8 hectare).

“We can see what’s happening to the crop without having to go out into the fields,” Brumby said. “We are using time, space and color to see plants change.”

Cash rents fall again

Cash rents for some of the most fertile farmland in the United States fell in the second quarter and are likely to decline again between July and September, according to a survey published by the Federal Reserve Bank of St. Louis.

The quarterly report, which covers the northern delta and southern Midwest region, added that incomes for farmers continued to fall in the April to

June period and further decreases are likely in the third quarter.

The rural economy has been hit by recent bumper harvests that have pushed grain prices to the lowest level in five years, and by a strong dollar that has hurt exports. As a result, farmers have cut back the amount they are willing to spend on their businesses.

“Our trade area is primarily cash grain, and the lower grain prices will have a negative impact on farm income, prompting producers to reduce spending for both business and household,” the report cited an Illinois lender as saying.

Cash rents fell 6.4 percent for quality farmland in the second quarter of 2015 – the largest drop since the survey started in the third quarter of 2012. A “slight majority” of bankers expect them to decline again in the next three months, the report said.

Those results are in contrast to figures earlier this month from USDA showing cash rents in the Corn Belt were steady to lower from a year earlier and had edged up on average across the country.

The USDA has predicted overall farm income will drop by a third this year to $73.6 billion, its lowest level since 2009.

CORN ANALYSIS

Corn closed the week 8.5 cents lower.

Last week, private exporters did not report any sales. Weekly export sales showed corn sales were 20 million bushels for new crop corn, a marketing year high.

New crop sales are 40 percent behind last year’s sales pace.

In the weekly crop progress and conditions report, USDA reported corn conditions unchanged from the previous week at 70 percent good-to-excellent. While the trade was looking for a small improvement, this year’s crop is only rated 3 percent less than last year’s record-setting crop.

Corn silking is 96 percent and only 9 percent is in the dent stage.

Minnesota’s crop is rated 89 percent g/e, the third highest on record, while the crop in Illinois is rated 56 percent g/e.

Iowa is rated 83 percent, Nebraska 77 percent and Indiana is 47 percent.

The report forecast U.S. corn yield at 168.8 bpa, with a production figure of 13.686 billion bushels. This was 2 bpa larger than July’s projection of 166.8 bpa and an average trade estimate of 164.5 bpa coming into the report.

When yields have been raised from the July to August report, in seven of the last 11 years, yields were also increased in the September report.

This places U.S. ending stocks for 2014/15 at 1.77 bb, while 2015/16 ending stocks are forecasted at 1.71 bb.

New crop ending stocks are up 114 million from last month and much higher than trade expectations of 1.424 billion bushels.

This news should pressure corn values during the early stages of harvest until a harvest low can be established.

Look for harvest lows to occur between $3.30 and $3.40.

Strategy and outlook: Producers are:

  • 100 percent sold of the 2014/15 crop.
  • Re-owned 50 percent with September calls, liquidate now.
  • Sold 50 percent of 2015 production.
  • Own December puts on balance of production.
  • Sold 20 percent of 2016 crop.

SOYBEANS ANALYSIS

Soybeans closed the week 47.5 cents lower.

Last week, private exporters did not report any private sales. Weekly export sales of new crop soybeans were 26 mb.

New crop sales are 47 percent behind last year’s sales and the slowest pace since 2008.

The weekly crop progress report showed soybean crop rating improved 1 percent to 63 percent g/e and is down 8 percent from last year.

Eighty-eight percent is blooming and pod-setting is at 69 percent.

Iowa is rated 79 percent g/e, Minnesota 83 percent, Nebraska 73 percent, while Illinois is 50 percent and Indiana is 45 percent.

For soybeans, the USDA pegged U.S. yields at 46.9 bpa, nearly a full bushel higher than July’s estimate of 46 bpa, and higher than any prereport guess.

This placed U.S. soybean production at an estimated at 3.916 billion bushels on 84.3 million planted acres. Planted acres were reduced by 900,000. Ending stocks for 2014/15 were lowered by 15 million bushels to 240 million bushels, while 2015/16 ending stocks were estimated at 470 million bushels, well above July’s forecast of 425 million.

The stocks figure is especially bearish and suggests the previous lows near the $8.95 level will be broken with a likely downside target near $8.30.

Demand is not nearly as strong as last year, leaving post-harvest rallies to come from South American production problems.

Strategy and outlook: Producers are:

  • Sold 100 percent of 2014/15 production.
  • Sold 50 percent of 2015/16 production.
  • Own November puts on balance of production.
  • Sold 20 percent of 2016 November.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department.

Brian Hoops can be reached at (605) 660-1155.

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