Grains struggle as the marketing year winds down
August weather is considered key for adding bushels to the soybean crop if timely rains occur. Over 80 percent of the U.S. soybean growing areas have seen above normal moisture levels for half of the past 30 days. Looking at the pod counts the ProFarmer tour saw this week would lead one to believe the crop has benefited from it. However, those high pods counts need to fill out completely to see the benefit of those rains.
Crop tour results seem to continue with a common theme, lots of variability in the corn crop. Some parts of the tour saw very good consistent stand counts and ear weights with strong yields, while other parts are seeing lower ear weights, uneven stand counts and yields short of expectations. Some of the scouts were interviewed noting that the crop is more inconsistent than in previous years, seeing better weed control particularly in soybeans and in some cases higher corn populations.
Export tariffs may have squashed soybean export potential, but corn exports have continued the keep up with expectations. Corn loadings are lagging just slightly, but sales are thought to meet the USDA’s target by Sept 1. A year ago, the USDA underestimated corn demand by 600 million bushels. If corn demand increases by the ten year average of 1.785 percent, that would increase 18/19 demand by 265 million bushels to 15.16 billion.
Soybean tariffs are not the only problem plaguing soybean prices currently. World supply is bulging and the most recent USDA forecast is reaffirming its not declining. Stocks to use ratios near 30 percent simply do not demand higher prices. Even if Chinese importing of U.S. soybeans resumes to its previous pace, global demand has begun to ease back some and stocks will still be plentiful. Even If exports were to increase to pre-tariff levels, prices could rise 50 cents and still make soybeans difficult to be profitable. Expansion of soybean acres in South America could further add to the problem as planting begins there in mid-September. The weather, interest rates and currency values will be key to what expansion does in South America.
A little more clarification on the tariff aid package is expected to be released on Monday. Early indications are that aid will be based on actual 2018 production. It will not be based on past averages and not include any 2017 production that has not been marketed. Payment rates, who is eligible and payment limitations will be released in a Federal Register filing. The payment limitations to the program are expected to be at an adjusted gross income of $900,000. Wheat producers will likely be the firsts one eligible to apply as the program is expected to open on September 4th. These payments will be a part of the Market Facilitation Program and commodities eligible will be corn, soybeans, cotton, wheat, sorghum, dairy and hogs.
Russia announced plans to limiting wheat exports on thoughts of a smaller 2018 crop. Officials there last week talked of limits on exports even though the crop is thought to still be close to the five-year average. Exporters are trying to ramp up exports now amid higher prices for wheat before the limits could go into effect in the later part of the export season around the new year.
The U.S. and Mexico are continuing their talks on the North American Free Trade Agreement (NAFTA) and there was hope it could be completed this week. No agreement has been finalized by progress has been made in forming some type of mutual agreement. The main sticking point holding up finalization is the automobile trade. With an agreement in place with Mexico, trader believes an agreement with Canada would soon follow. Canada has said they are optimistic they can finalize an agreement with the U.S. as progress with Mexico continues.
African Swine Fever has become a very serious issue for Chinese pork production as they found their 4th case this week. Russia has spent 10 years trying to control the disease, which can have mortality rates of 100 percent. The swine industry has never seen a case of it in an intensive production system and the control of the disease could become challenging. China accounts for 54 percent of the world pork demand. Even small changes in pork supply and demand in China can have a large impact on the world pork supply.
Historically speaking, the Pro Farmer crop tour is statistically inaccurate at calling USDA final yield results. On average, the tour has been low 11 out of the past 15 years, 2.7 bushels per acre for corn and .6 bushel per acre for soybeans. At this point of the year, right or wrong, the crop tour has the market keeping a close tabs on anything that is considered out of the ordinary.
With each passing day, analyst continue to make revisions on their balance sheets. Lately the drop off in soybean exports has been extremely troublesome for the interior market. Basis values in the PNW and CIF markets continue to deteriorate with harvest underway in Delta. This has been concerning to some, as the US has traditionally been a very aggressive exporter of beans in the first two quarters.
For more information, you may contact Adam Suntken at (712)-454-1061, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Adam Suntken. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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