Welch on Grain: Corn Exports Exceed USDA MY Target

    Market Situation

    Crop Progress. The Crop Progress report from USDA Monday showed no changes compared to the week before, despite heat advisories and heat warnings across the Corn Belt. So far this season the percent of crop rated good and excellent has been consistent at about 75%. The condition index is 389, above the average for this time of year of 366 and is tracking closely with the index in the yield record setting season of 2014.

    With above normal temperatures, corn yield can be reduced regardless of soil moisture conditions. Temperature stress can occur when the daily average temperature is above 77° and daily maximum is above 95°. The most critical growing stage for corn development is the tasseling, silking, and pollination phase (“Weather Stress in the Corn Crop”, Purdue University). In this week’s Crop Progress, Illinois, Iowa, and Indiana averaged 85% of the crop silking, 11% had reached the dough stage.

    Field level yield estimating surveys will be conducted in the next few weeks, notably by USDA for the August 12 Crop Report then The Pro Farmer Midwest Crop Tour August 22-25.

    The Drought Monitor released yesterday shows just over 25% of the Midwest in some degree of dry condition, down from 26% last week and a growing season high of 30%. The percent of the Midwest in moderate drought, D1, dropped from 6% to 5%.

    Grain Use. Reported corn export sales numbers exceeded USDA’s marketing year target in this week’s export sales report: 17 million bushels for the week, 1.917 billion for the year. Sorghum export sales are running just below the pace needed to reach USDA’s forecast of 330 million bushels.

    U.S. ethanol production for the week is off its record high but still 3% above last year and 13% above average. Production in the 2015/16 corn marketing year is running 2% above last year and 9% above the 5-year average.

    At the beginning of the month, USDA releases the Grain Crushings and Co-Products Production report. This publication shows the bushels of corn and hundredweight of sorghum used for fuel alcohol production. Until this marketing year, the monthly numbers for sorghum were not always available due to the numbers being low enough that to release them might disclose data for individual operations.

    The increased use of sorghum in the ethanol production mix can be seen by comparing monthly corn crushing numbers. In May, ethanol production was about the same as the year before but corn consumed for fuel was down 5%. For the current marketing year through May, ethanol production was up 3% compared to last year but corn consumed for fuel was unchanged.

    Using the sum of the monthly WASDE corn for fuel estimate and sorghum food, seed, and industrial use numbers as a target for the 2015/16 marketing year, the crushing rate so far this year is on pace to reach USDA’s projection.

    Grain Commentary

    Unable to display feed at this time.

    Outside Markets. The Federal Open Market Committee of the Federal Reserve met again this week and decided to hold interest rates steady for the time being. In the release of the minutes of that meeting the committee noted that “…the labor market strengthened and that economic activity has been expending at a moderate rate” since June and the committee expects “…economic activity will expand at a moderate pace and labor market indicators will strengthen”.

    Given that “Near-term risks to the economic outlook have diminished”, any future increases are expected to be gradual and below long-term averages. The next meeting of the FMOC is in mid-September followed by the last meeting of the year in December.

    In a report that might temper the Fed’s outlook, the Bureau of Economic Analysis released its advance estimate of GDP growth for the second quarter of 2016 this morning. The report shows the economy grew 1.2% in the second quarter, about half of what many analysts had expected. Consumer spending (which makes up about 70% of the U.S. economy) was up 4% but business investment (17% of the economy) was down 10%.

    Marketing Strategies

    Seasonality. The price pattern of the December 2016 corn futures contract has been tracking closely to normal seasonal patterns. Longer term seasonal patterns show a tendency for prices to continue lower into harvest, while the shorter 10-year chart reflects some dramatically higher late season corn prices in that time series, specifically, 2006, 2007, 2010, and 2012.

    2016 Feed Grain Marketing Plan. My next marketing objective to add to 2016 feed grain sales is around the time of the August crop report. That is the first USDA survey-based yield estimate of the 2016 crop. Private firms and crop tours will be providing production estimates in late July and August as well. If the heat this summer had an effect on ear size and fill, it should show up in these scouting reports.

    Upcoming Reports/Events.
    July 1 – Registration open for The Executive Program for Agricultural Producers (TEPAP), January 8-14, 2017
    August 9 – Short-term Energy Outlook
    August 12 – Crop Production; WASDE
    August 19 – Cattle on Feed
    August 22-25 – Pro Farmer Midwest Crop Tour

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