Welch on Grain: Corn Exports Remain Above USDA’s Target

    Corn pouring out of an auger during corn harvest. Photo: ©Debra L Ferguson Stock Photography

    Market Situation

    Crop Progress. The Crop Progress report today from USDA showed a decline in corn crop conditions consistent with seasonal trends. The crop condition index fell 4 points to 385 with a 1% increase in corn rated very poor, a 1% increase in fair, and a 2% decrease in the good category.

    The average index score for this time of year is 367. The index for the same week in the yield record setting year of 2014 was 386.

    In the crop maturity indicators, 97% of the crop has silked (94% average); 53% has reached the dough stage (42% average); and 9% is dented (12% average).

    Field level yield estimating surveys have been conducted over the last few weeks, notably by USDA for the August 12 Crop Report. Another major yield estimating survey will be provided by the Pro Farmer Midwest Crop Tour August 22-25.

    The Drought Monitor from last week shows just under 20% of the Midwest in some degree of dry condition, down from 21% the week before. The percent of the Midwest in moderate drought, D1, increased from 5% to 6%.

    Grain Use. Reported corn export sales numbers remained above USDA’s marketing year target in this week’s export sales report: 13 million bushels for the week, 1.930 billion for the year. Sorghum export sales of 4 million bushels were back to just above the pace needed to reach USDA’s forecast of 330 million bushels.

    U.S. ethanol production for the week of July 29 was 4% above last year and 14% above average. Production in the 2015/16 corn marketing year is running almost 3% above last year and 9% above the 5-year average.

    The August 1 Grain Crushings and Co-Products Production report showed that for June, corn and grain sorghum consumed for fuel alcohol was 432 million bushels, 421 corn and 11 sorghum. The totals so far this year are 4,286 million corn and 118 million grain sorghum.

    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 just below the pace needed to reach USDA’s projection. The crushing average would need to be 478 million bushels for July and August to reach 5,360 million bushels. That pace would be the highest levels of the year at a time when ethanol production has begun its seasonal decline.

    I do not look for a significant change to old crop corn use totals in the August WASDE given what is likely to be a small increase in exports and potential decrease in fuel.

    Grain Commentary

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    Outside Markets. The July jobs report was better than expected last Friday, +255,000. In addition, the May number was revised from +11,000 to +24,000 and June from +287,000 to +292,000. In response, the S&P set a new record high. The strength in the labor market makes it more likely that the Fed will move to raise interest rates this year. The next policy meeting is September 20-21 followed by December, after the election and a year out from the last rate hike.

    Marketing Strategies

    Seasonality. The price pattern of the December 2016 corn futures contract has been tracking along the lines of normal seasonal patterns. Longer term seasonal patterns show a tendency for prices to continue lower into harvest after a modest bump in mid-August to early September. 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 August as well. If the heat this summer had an effect on ear size and fill, it should start to show up in these scouting reports.

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

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