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Strong yields and a shut-down government
Yields of corn and soybean harvest continue better than expected, and that will pressure grains once the world learns about these larger than expected yields. However, the government is currently shut down, and no longer will we be receiving weekly crop condition ratings and weekly export numbers. More importantly, there will be no issuing of an OCTOBER report by USDA, where its likely that yields of both corn and soybeans would be hiked due to the better than expected yields being harvested right now.
Instead, the uncertainty of having no government reports when we are used to them telling us how much is harvested, how the crop ratings are going, and how much grain is being used each week through the vast array of government reports. Instead, there is just more and more uncertainty in what is happening with the grain market. That is leading to higher prices, as the market drifts higher in grains the longer we go without the government reports. This is good news for market bulls, especially as we enter harvest of what is likely to be near record or record large corn yields, and a decent soybean crop, too, in spite of a dry period of over a month long from mid-August to mid-September.
But since mid-September, it has become painfully obvious that the dry period did not do nearly as much damage as expected to soybean and corn crops. The biggest surprise perhaps of all has been soybean yields, which have been mostly surprising people on the large side of yields. It was surprising that the month long stress of hot and dry conditions did not do more damage. In fact, Pro Ag yield models last week rose sharply for soybeans as crop conditions improved 3% last week to 53% G/E, with the Pro Ag yield model now at 43.73 bu/acre, now slightly above trend yields.
The hike in soybean conditions last week (the last report by the government before shutting down) indicated that yields are shocking farmers on the high side, and reports of better than average yields are accurate across the corn belt. Corn conditions were steady at 55% G/E, with the yield model dropping slightly to 161.6 bu/acre. However, both of these numbers (161.6 bu/acre corn and 43.73 bu/acre soybeans) are well above USDA numbers for corn (155.3 bu/acre) and soybeans (41.2 bu/acre). So its likely that when USDA goes back online once the government gets back to work will mean bearish news for the market.
But until then, markets are free to go higher in spite of harvest, which is hitting stride this week with weather finally drying out after widespread rain over the weekend (85% coverage of .25-1", locally 2-3" rains across the corn belt). The next week includes warm and dry conditions across the corn belt, with well above normal temps which is especially bearish for those states in need of more frost free days. This includes WI, which is the state with the most corn not in the dent stage as of the last report. In fact, WI might be the only state with a significant amount of corn or soybeans not yet in the mature stage of development.
Pro Ag remains bearish; Final Pro Ag downside price targets are $4.25 Dec corn, $11.10 Nov. soybeans, and $6 CBOT wheat. However, if the corn low at $4.25 breaks, we could roll down as low as $3.20 in corn (which might depend on just how good harvest yields are - if we break the old record of 164 bu/acre its likely we will go below $4.25). But until the government gets back to work, there will be no one to confirm or deny the reports about the better than expected yields. So until that happens, the market could just slowly drift higher as more and more uncertainty builds and makes market participants uncertain about the future of grains. This is good for bulls - at least for now - with bearish news likely to be reported once the government gets back to work!
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