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The Trade Faces a Plethora of Market Factors

Tariff talks, weather, harvest . . . the list goes on and on.

Typically, this time of year all we talk about is yields – is the corn/soybean yield bigger or smaller than this or that estimate? 

But in 2018, we have another factor to discuss in August (and maybe every month this year), and that is policy. Or more specifically, what tariffs will or will not be in place a month/year/decade from now? 

That becomes super important to the U.S. market, as we export about half our wheat and soybeans, and about 13% to 15% of our corn. If we don’t export anything, that’s more acres to plant to all remaining crops. 

So, prices sag with an export war on grains in the U.S., as opposed to something like, say, sugar, where we import more than we export. A trade war for anything we import is a good thing price-wise (like steel).  

News the past week is that China is sending midlevel negotiators in late August to the U.S. to work out a framework for Presidents Trump and Xi to meet in November – hopefully to resolve the trade dispute with China. 

Both leaders are under pressure to come to some agreement, but the proof is in the pudding!  We’ll see if we can actually come to some agreement that would be beneficial for both countries. And that might not be hard to do, as China really needs our soybeans, pork, and energy.  We also like to buy all their trinkets and clothes made in China, as we buy $505 billion worth every year.  

Weather has been benign the past week or so, and more benign weather is on the way. Mostly above-normal temps and below-normal precip are forecast for most of the Corn Belt the next 14 days, but where rain will fall has been the relatively drier northern Corn Belt. 

Today there is rain in the northeast Corn Belt, including Michigan, northern Indiana, Ohio, and Pennsylvania, and parts east. The next seven days include normal to above-normal rainfall forecast in the same region, including Wisconsin, Michigan, Illinois, Indiana, and Ohio. 

It is forecast below normal in all the rest of the Corn Belt. This means the northwestern Corn Belt will see some stress in these areas since not much rain has fallen lately. Temps will be above normal in all the Corn Belt the next seven days, and extend into the eight- to 14-day period with even warmer temps. 

But that takes us into September, when the crop matures, and we could actually use a few extra growing degree days at that time. 

The eight- to 14-day period is mostly in September, so warm/dry weather then is just great weather for harvest preparation, as we don’t necessarily like soggy, soft soils at harvest that make combining miserable.  

Crop conditions are dropping as we get closer to harvest, with corn down 2% this week to 68% G/E, and soybeans down 1% to 65% rated G/E. Yield models didn’t change much, with soybeans actually up 0.13 bushels per acre to 48.68 bushels per acre. That is still well below USDA’s 51.6 bushels they put out in August. Essentially, they put their necks out there by going 3 bushels per acre over yield models.

Corn yield models dropped 0.29 bushel per acre to 176.8 bushels per acre, also below USDA’s 178.4 bushels. But at least the corn is relatively close to the yield model, as opposed to soybeans.

Private estimates are out this week, with the Pro Farmer tour getting a lot of press as usual. But its track record for accuracy is wanting.

We know the crop is good, but how good? A satellite imagery company this week got a lot of press putting out a 175-bushel-per-acre corn estimate and a 50.7-bushel-per-acre soybean estimate. That was down from August 9, the date of the USDA report. 

Actually, USDA numbers look high to almost everyone, especially soybeans, so perhaps they are?  The combines are the lie detectors, though, and we’ll know what really is true once the combines start to roll.    

Crop development is well ahead of normal, with soybeans 91% setting pods (8% ahead of normal), and. 

Corn is 85% in dough stage (13% ahead), and 44% is dented (18% ahead). 

Cotton bolls are 17% opening (5% ahead), and ratings were up 2% to 42% rated G/E (still well below last year’s 63% rating). 

Sorghum is 87% headed (4% ahead), 46% coloring (3% ahead), and 23% mature (4% behind).  Sorghum conditions were steady at 49% rated G/E, well below last year’s 66%
rating.  

Winter wheat is 97% harvested (1% behind), and HRS wheat is 60% harvested (16% ahead), with HRS wheat conditions down 1% to 74% rated G/E.  

Oats are 80% harvested, 3% ahead of normal, and barley is 66% harvested (10% ahead) while ratings dropped 3% to 78% G/E.  

Nationally, rains were beneficial last week as topsoil moisture rose 5% to 62% adequate/surplus, with subsoil up 3% to 60% rated G/E. So moisture conditions are good heading into September, so the crop can’t be hurt excessively by warm/dry September weather (as is forecast). 

It looks like we’ll have another above-average crop in 2018, the only question is how much above average.

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Ray Grabanski can be reached at raygrabanski@progressiveag.com.  
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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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