Crop Conditions and Trade Dominate Market Discussions
Grains got a boost from last week’s announcement by the EU and U.S. that they were going to work out their trade disagreements and come to an understanding.
A relatively surprising development was the news that Europe would buy more U.S. soybeans as a result of that agreement. Not only that but agriculture trade would also be on the discussion blocks, which hasn’t occurred in decades.
Europe, to this point, has simply said no to any discussion of trade in the EU, as it protects its agriculture and essentially subsidizes it by placing prices 100% higher or more than U.S. prices. This is truly a protected system, with no trade allowed (only exports) as the EU doesn’t care how much food costs. So, if that market were opened even a little, it is an even larger market than China (and friendlier to the U.S. as they are not Communist yet – just Socialist).
The big news in grains is the change in the weather forecast the past 24 hours, switching from a benign forecast to one more droughty like, with warm/dry weather forecast for the next two weeks.
The next seven days are forecast above-normal precip yet in the eastern Corn Belt (rain today in Illinois, Indiana, and Ohio) and the southeast U.S. But the western and central Corn Belt forecast is now below-normal precip the next seven days, and in the eight- to 14-day get even drier and include most of the Corn Belt in the below-normal category. The only exceptions in the eight- to 14-day are Ohio, Kentucky, Tennessee, and parts of Colorado and the southeast, which is still near normal.
Temps now are forecast below normal in the southeast U.S. for the next seven days, but then most of the Corn Belt and U.S. is above normal in days eight through 14. This is a fairly dramatic change in the weather forecast in a short period of time. Of course, much of the U.S. corn crop will be affected less by a hot/dry August since July is the month to make U.S. corn (and July was a nice month for weather), but soybeans are more susceptible to warm/dry weather in August – especially in the southern half of the Corn Belt and the Delta regions. We could trim the soybean crop 1 to 2 bushels with adverse weather in August – a fairly bullish development for soybeans with them trading at less than $9. Of course, weather forecasts are updated twice a day, so this could become more favorable (or less favorable) in time.
Crop progress, yesterday, was a nonevent, with crops basically improving again slowly as they have about all summer. Soybean conditions were unchanged at 70% rated G/E, with the Pro Ag yield model remaining quite high at 49 bushels per acre.
Corn conditions are even better at 72% rated G/E (unchanged from last week), with the Pro Ag yield model up 0.20 bushels per acre at 177.7 bushels per acre – which would be a new record. Crops are developing ahead of normal, with 86% soybeans blooming (+9% from normal), and 60% setting pods (+19%). Corn silking is 91% (+9%), and 30% in dough stage (+18%).
Cotton is 88% squaring (-1%), and 49% setting bolls (+1%), with conditions 43% G/E (+4% from last week).
Sorghum is 54% headed (+4% from average), and 26% coloring (1% behind). Sorghum conditions rose 3% to 52% G/E, still down from last year’s 61% rating, which shows some of the stress in the western Corn Belt in 2018.
Winter wheat is 85% harvested, 1% behind normal with HRS wheat 4% harvested (equal to normal). HRS wheat conditions dropped 1% to 78% G/E, with some realizing that the warm temps in May and June might have hurt HRS wheat yield potential somewhat.
The cooler July helped, and if temps/precip turn warm/dry in August, that will be perfect harvest weather for HRS wheat producers.
Oats are 38% harvested, 3% ahead of normal with conditions rated 71% G/E (down 1% from last week). Barley is 97% headed (1% behind normal), with 2% harvested (4% behind normal). Barley conditions were 80% G/E, down 1% from last week but well above last year’s 49% rating.
Topsoil moisture is still relatively decent, with 61% rated adequate/surplus (down 1% from last week but still 8% above last year), and 61% adequate/surplus subsoil moisture (down 2% from last week but still 4% above last year). So soil moisture is not a problem yet, but with a warm/dry August in the western Corn Belt, it will put some stress on corn (and more likely soybeans).
So, weather to this point has been favorable for the crop, with high ratings yet. But a warm/dry August still can trim the corn some, and the soybeans a higher percentage.
As we noted yesterday, Minneapolis wheat prices have recovered nicely in old crop, but even more in new-crop prices with MW September 19 now at about $6.41, and the high was $6.60 May 29. Also, if trade deals are not worked out, then ag prices will be lower next year than this year, not higher, and Minneapolis September 19 has a nearly 40¢ premium over September 18. Many producers need to have something priced to get rid of some risk involved in these trade disputes, so this might be a good place to start. So we are recommending pricing 20% of the 2019 crop at $6.43-44 MWE September 19.
We’re also going into harvest of HRS wheat shortly, on what is likely to be another above average crop (not below average like the HRS wheat tour concluded last week). So, on the rally of the bullish wheat tour news, this might be a good opportunity to make some sales before harvest, too.
Ray Grabanski can be reached at email@example.com.
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years.
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