Will Markets Stay Lower Longer?
As we stated last week, it looks like the U.S. will get a record-large wheat, corn, and soybean crop in 2016. Prices pretty much reflect that reality already, as we are at or near some multiyear lows for corn and wheat, and
seemingly on our way there for soybeans, too. How long we stay down here at low price levels might be the next question of the day in the marketplace. Usually, bottoms last months while tops last minutes, so it might be awhile before prices start to move higher.
Corn crop conditions actually declined a bit this week, down 1% from the excellent category down to fair, now rated at 74% rated G/E, still above last year’s 68% rating.
The Pro Ag yield model was basically steady this week at 177.4 bushels per acre, still slightly above USDA’s August estimate of 175.1 bushels per acre. So that means it’s likely that USDA will have to hike the yield slightly again in the September report. Many, including the Pro Farmer tour, thought the August USDA report estimate was too high at the time, as they were very aggressive in raising it from July. So how aggressive will they be this month? Doesn’t seem like they’ve left a lot of room as they already have a record-shattering yield forecast for 2016 as our previous record-high yield was in 2014 at 171 bushels per acre. Why USDA is so aggressive this year in hiking yields we don’t know, but it will be telling to see what they do to follow up the August numbers in September.
Soybean crop conditions continue strong at 73% rated G/E, the same as last week, and well above last year’s 63% rating. The soybean yield model continued to expand this week, up another 0.10 bushel per acre to now be at 48.71 bushels per acre. That is up considerably from last month, but still below USDA’s 48.9-bushels-per-acre estimate in the August report, when they raised yields a large 2.2 bushels per acre in that early report. The 48.9 bushels per acre would shatter the previous record of 48 bushels per acre set just last year!
The yield model has expanded since August 7 when it was at 47.3 bushels per acre, but USDA already exceeded that by a lot in the August report. About the only thing USDA can do now is continue to hike the number (although it could be a small hike in this report) to show some consistency in its numbers. So the September report might be bearish, but not as bearish as the August numbers.
Maturity of the crops is expanding as well, with the corn at 96% dough stage vs. 94% normally, with 76% dented vs. 69% normally, and 18% mature vs. 20% normally.
Corn harvest will start to expand shortly as more of the crop is reaching maturity. That also means it is less susceptible to frost damage at this point, as we enter September. Soybeans are 97% setting pods (equal to average), with 12% dropping leaves (also equal to average).
Other crops are doing equally well. Cotton conditions are rated 48% G/E, the same as last week but below last year’s 53% rating. Cotton bolls are 33% opening, the same as the five-year average. Sorghum is 74% coloring vs. 61%
normally, and is 38% mature vs. 33% normally, with 20% harvested vs. 25% normally. Sorghum conditions expanded 1% to 66% rated G/E, now down only 2% from last year’s 68% G/E rating.
HRS wheat harvest is racing along, now at 91% complete vs. 75% normally at this time. Barley harvest is also 91% done vs. 82% normally at this time. Some areas of North Dakota and northern Minnesota are struggling with wet soil conditions such that it required tracks to harvest the grain. But farmers are always very innovative and progressive in getting their crop out of the field, and this year is no different.
Soil moisture conditions are still rated quite high, as we continue to get spotty rains as we have all summer to keep the crop rated quite high. Topsoil moisture conditions are still rated 75% adequate/surplus, so we still have moisture to help fill corn and soybeans. Subsoil moisture is also rated quite high at 74% adequate/surplus, steady from last week and well above last year’s rating of 63% adequate/surplus. So we have the soil moisture to finish off this crop and make the record-large yields USDA has already projected (as early as August).
Ray Grabanski is President of Progressive Ag Marketing, Inc.
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