Market Situation
Crop Progress. The crop condition index for U.S. corn increased one point this week, very close to normal levels and consistent with seasonal patterns. The crop index this week is 358 and the average for late September is 360. The index usually bottoms out in early September and shows a slight increase as harvest expands. Maturity is running behind normal, 51% this week compared to an average of 64%.
The list of major corn producing states with double digit ratings of poor and very poor decreased from 11 back to 9 this week (% change from last week): Illinois, 14% (+1%), Indiana, 18% (+0%); Iowa, 13% (+0%), Kansas, 19% (+2%), Michigan, 15% (-2%), Nebraska, 11% (-3%); North Dakota, 16% (+0%), South Dakota, 27% (-1%), and Wisconsin, 11% (+1%).
Grain Use. Friday’s Cattle on Feed report showed the inventory expansion which began over the summer continuing into September. On feed numbers are up 4% compared to last year and the five-year average. Increasing numbers of cattle on feed combined with continued growth in broiler chick placements and hog and pig inventories (next update 9/28/2017) supports estimates of feed use in the supply and demand balance sheet.
In the estimate of Grain Consuming Animal Units by USDA, the total for 2017 of 98.044 million is an all-time record high as is the number for poultry of 32.383 million and pork, 29.728 million.
Outside Markets. At the meeting of the Federal Open Market Committee of the Federal Reserve last week, the Committee chose to leave the target range for the federal funds rate unchanged at 1 to 1-1/4 percent. The Committee’s statement noted strength in the labor market and economic activity but inflation, excluding food and energy, is still below the Fed’s target of 2%.
Committee member’s projections of GDP, unemployment, inflation, and interest rates were included in the Fed’s statement. These projections show that the federal funds rate is expected to increase by about a point in 2018 to 2 to 2-1/2 percent and the midpoint of estimates for 2019 is just below 3 percent.
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Marketing Strategies
Seasonality. The seasonal price pattern for the December corn contract shows that prices tend to fall off after we know more about acres (June 30 Acreage report) and weather during the precipitation and temperature sensitive silking and tasseling stages (July).
With dry conditions impacting major corn growing areas, yield concerns have propped up prices more so than we would see in a normal year, compounded by significantly fewer corn acres this year.
The corn production estimate came in slightly higher than expected in the September WASDE which may test whether we have seen the seasonal low a few weeks early.
2017 Feed Grain Marketing Plan. I am 80% sold on the 2017 corn crop and will price the remaining 20% at harvest. I am turning my attention to the December 2018 contract and am prepared to make sales against next year’s crop if we get a significant late season rally.
Upcoming Reports/Events.
September 28 – Hogs and Pigs
September 29 – Grain Stocks Small Grains Summary
October 12 – Crop Production and WASDE
January 7-13 – TEPAP
January 16 – Master Marketer Leveling Workshop, Waco
January 17-18 – Master Marketer Session I
January 30-30 – Master Marketer Session II
February 13-14 – Master Marketer Session III
February 27-28 – Master Marketer Session IV
