Market Situation
Crop Progress. Tuesday’s Crop Progress, delayed because of the Labor Day holiday, showed a 1% decline in corn rated excellent and a 1% increase in the fair category. These changes lowered the corn crop condition index score from 387 last week to 385. The normal reading for this late in the season is 355 and a 2 point drop is typical.
In the record yield setting year of 2017, the index score was 387 for this week and continued to increase through the middle of October.
USDA reports that 76% of the crop is in the dent compared to 69% on average. Next week’s report is expected to contain percent harvested numbers.
The area of the Midwest impacted by drought continued to drop last week, down to about 10%. The peak of drought intensity in this region was early July.
Yield. Planting of corn and soybeans in South America will soon be underway. The 2016 corn yield in Argentina is projected at 129 bushels per acre, up about 2 bushels from 2015 but below 131 bushels per acre in 2014 and the record 133 bushels per acre in 2009.
In Brazil, the average yield is projected at 81 bushels, up 12 bushels from 2015 and down from the record yield in 2014 of 86 bushels per acre. Soybean yields are projected to be up slightly from last year at about 44 bushels per acre.
Acreage. Harvested acres of corn and soybeans in South America for the 2016/17 crop year are both projected at record high levels. Combined corn acres are estimated at 50.2 million acres, up from 48.2 million last year and soybeans at 132.6 million, up from 129.7 million.
These acreage and yield estimates would result in a South American corn crop of 4.6 billion bushels and a soybean crop of 5.9 billion bushels. In 2015 production was 3.8 billion bushels for corn and 5.6 billion for soybeans.
Grain Use. The Grain Crushings and Co-Products Production report for July shows corn processed for fuel at 455.399 million bushels and grain sorghum at 5.980 million cwt (10.679 million bushels). The total for the month was 466 million bushels.
To reach USDA’s grain for fuel use target of 5,340 million bushels (5,200 million corn and 140 million sorghum in the August WASDE), crush in August will need to be about 464 million combined bushels.
Outside Markets. August jobs report from the Bureau of Labor Statistics shows the U.S. economy added 151,000 jobs last month, down from over 250,000 in June and July. The civilian unemployment rate (U3) held steady at 4.9% and the broader measure of unemployment that accounts for those working part time but seeking full time positions, U6, held at 9.7%. The difference between these two measures is 4.8%, just above the 20-year average of 4.7%.
With moderate job growth, mild inflation, and the presidential election in November, it seems more likely that the Fed will not feel compelled to raise interest rates at its September policy meeting, delaying that decision until December at least.
Marketing Strategies
Seasonality. The late-August seasonal price bump was short lived and we appear headed for the typical harvest low in early October. After that prices tend to stage a modest recovery.
2016 Feed Grain Marketing Plan. Given the degree to which prices have fallen and remaining uncertainty over yields and acres, I am delaying adding to grain sales for 2016 at present. I do not expect the corn ending stock estimate in the September WASDE to be higher than the August number, 2.409 billion bushels, either because of adjustments to use or production.
Upcoming Reports/Events.
September 7 – Short-term Energy Outlook
September 12 – Crop Production; WASDE; FSA Crop Acreage Data
September 23 – Cattle on Feed
September 30 – Grain Stocks; Small Grains Summary; Hogs and Pigs
January 8-14 – The Executive Program for Agricultural Producers, information available here
