Holding onto two years worth of crops worked, analyst says
The bull market, so far this week, has seen a pause, and what a great run it has been.
Since August, soybeans have rallied $2, corn 80¢, and wheat over $1 to give producers a good price again. They might even break even this year selling their grain!
That is opposed to selling much below the market for the past two years (other than last May/June in corn).
Pro Ag mostly sold corn last May/June the past two years, and didn’t like selling at huge losses almost anything else.
Therefore, we had a lot of inventory on hand when this market broke higher. So we have made a lot of sales at profitable levels the past few weeks, culminating in sales almost every day the past week or so. These sales are good at over $10.50 soybeans, $3.90 corn, and $5.90 wheat.
So yes, patience is still a virtue.
We are so surprised at how much the Wrong-Side Randys of the marketing world have sold the past two years at heavy losses. These same marketers keep talking down the market now, due to their mistakes of selling too early. They are seeing only the bearish side, as they did the past two years when they were selling soybeans at less than $8 futures. So sad! The world has changed, and we need to change with it.
With this week’s yield model decline again in projected soybean yields, if our 49.65 bu/acre soybean yield is correct for 2020, soybean carryout will decline below 200 million bushels, unless price rationing occurs.
What a change a year can make!
Weather forecasts have some light rain in the U.S. today (MT, WY, Dakotas, MN, WI), but the 14-day forecast is still calling for below-normal precip in virtually the entire United States. Temps will also be below normal, as we near completion of harvest in some areas. South American (SAM) weather is below-normal precipitation the next seven days, but forecasters (as they typically do this time of year) want to push the extended forecast back to normal precip and normal temps. That is typical in SAM since it rains a lot there during the normal summertime period (about 2 inches a week in most areas). The forecast tends to push back toward normal temps and precip in the eight- to 14-day forecast.
Crop progress was out yesterday (one day late for Columbus Day), and showed U.S. harvest progress at 61% soybeans (19% ahead of normal), and corn harvest at 41% (9% ahead of normal). Harvest is rapid because crops are drying down quickly, with many northern Corn Belt combines going in corn that is 17% moisture or less at times.
It actually is too dry to combine as a higher percentage is cracked. (It should have been combined at 20% or so.) Farmers are saving money on drying cost, but there are harvest losses as well.
Soybeans are much drier, with the same issue, only farmers are also harvesting many at less than 13% moisture. So they are losing bushels when the moisture content is 10%, let’s say (just over 3% loss). This could reduce yields somewhat, although harvest losses are typically less in rapid-harvest years.
Crop conditions continue to decline, with corn down 1% to 61% rated G/E, and the Pro Ag yield model down 0.67 bu/acre this week to 175.9 bu. That represents a 58-mb decline in yields this week, and since Aug 10, the Pro Ag yield model has declined 5.3 bu/acre, or about 420 mb. The current USDA yield of 178.5 bu is now 2.6 bu/acre too high, or about 216 mb. More bullish news is coming to the corn market in coming months.
Soybean conditions were down 1% to 63% rated G/E, with the Pro Ag yield model down 0.2 bu/acre this week to 49.65 bu (vs. USDA’s 51.9 bu). The Pro Ag yield model has dropped 1.5 bu/acre since Aug. 10, which is 125 mb. Currently our yield model is 2.25 bu below USDA or 187 mb, which subtracted from current 290 USDA projected carryout leaves a very tight 103 mb. Soybeans are still a very bullish market - if this is correct we will test $11.60-$12, and perhaps even higher, before this marketing year is done.
In other crops, cotton conditions were steady at 40% rated G/E, unchanged from last week with 26% harvested (1% behind normal). Sorghum is rated 50% rated G/E (down 1%) at 49% harvested (which is 6% ahead of normal).
Sugarbeets are 72% harvested vs. 47% normally, so that harvest is going much better this year than last year's disaster. Sunflowers are 22% harvested (12% ahead of normal) as the major drought in North America
continues to advance harvested along. Winter wheat is 68% planted (7% ahead of normal), but of course that is planting in a major drought as soil moisture is drying up all over the US. Currently, pastures are
rated only 22% G/E, down 4% from last week as the drought has devastated pastures in the west.
Soil moisture continues to be rapidly depleted, with last week losing 6% topsoil rated adequate/surplus (now at 47%), and subsoil losing 4% (now at 50%), well below last year’s 72% rating. So, the drought is ravaging soil moisture levels across the U.S. this fall, which could be an ominous pattern for us as we enter freeze-up.
Just a quick reminder that the most devastating U.S. droughts occurred in 1980 and 1988 – years when drought was devastating the fall before. So, this becomes a bullish factor for grains this winter, and will especially be evident in winter wheat once ratings begin. Make no mistake, the U.S. drought has devastated soil moisture, and that puts the 2021 crop in jeopardy absent some heavy spring rains.
Ray can be reached at firstname.lastname@example.org.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country. See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com.
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