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Why Do Ag Prices Keep Going Down, Analyst Asks

Tough year should mean higher prices, right?

Ag Commodities have done almost nothing else but go down, down, down in the past five weeks.  

The leaks lower have been slow, almost imperceivable day by day, but when you look at the weekly changes we almost exclusively went down, down, down.  

This, in spite of a poor production year in 2019 for the U.S., as we first didn't plant 15-20 million acres, and then slowly lost yield and production potential from late planting and weather that was too wet and cool much of the year.   

Harvest weather is also turning adverse, with a major snow storm over NE and CO, today, and moving slowly northward and westward that will likely end the harvest for many states where heavy snow falls.  And many states are not very advanced in their harvest of corn, especially ND (30% vs. 91% normally), MN (86% vs. 97% ave), SD (68% vs. 98% ave), WI (57% vs. 85% ave), and MI (56% vs. 83%). 

These are the far northern states where snow is likely to last until spring, and also where late planted crops never reached maturity. So, they are still way too wet to harvest (25-35% moisture) and no propane is available anyway.  It's likely that with 16% of corn nationally left to harvest (12% behind normal progress), probably 5-10% won't be harvested until spring.

Even soybeans are only 94% harvested, 3% behind the normal pace but northern farmers had to focus on soybeans to get them off before major snow fell.  However, WI is still only 82% harvested soybeans vs. 97% normally, so we could lose some soybeans there.  ND is only 89% harvested with soybeans vs. 99% normally, so its likely 10% or so won't get harvested as they are under water/mud/snow already.  Also MI is only 80% harvested vs. 94% normally, so they will likely lose some soybean production as well.  

The closer one looks at the corn/soy harvest, the worse it looks for northern areas that are at risk of losing crop to this very wet fall and relatively late planting year (with immaturity a problem - more so in corn than soybeans). 

We note that cotton harvest (4% ahead of normal at 78% harvested) and sorghum harvest (5% ahead at 97% harvested) in the south are ahead of normal progress, with winter wheat on schedule too with 87% emerged (only 3% behind normal) and conditions at 52% rated G/E (same as last week). 

But sunflower harvest in the north is 33% behind normal at 56% complete, similar to the soy/corn harvest up north.  It is a potential disaster in northern areas - especially with a large snowstorm bearing down on these states over Thanksgiving.  

We note that soils that didn't seem possible to get any wetter  - got wetter this week, with subsoil (82% adequate/surplus) and topsoil (83% adequate/surplus) both rising 1%.  Actually, we are even wetter now than most springs - and it's not likely to get any drier over winter.  In fact, the risk of prevent plant in 2020 is probably the highest it's ever been because (1) soils are as wet at freeze up as ever, and 2) Very little fall fieldwork was completed due to soggy soils this fall. 

That leads to a high likelihood of prevent plant next spring - especially on corn ground still not harvested, or even standing corn stubble.  Even soybeans
in 2019 that didn't get worked this fall will be difficult to get planted in some areas.  A great risk of prevent plant falls on many areas next spring.

Given the horrible 2019 season, you'd think prices would be high, or at least higher.  But the market is saying that without a Chinese-U.S. trade agreement, U.S. commodities may always be relatively worthless - regardless of our production year?  

What about with a trade agreement? 

It is probably no coincidence that while originally we had a Nov. 17 date to sign a China-U.S. trade agreement - it didn't happen as Chile has some communist revolutionaries/protestors that cancelled the meetings.  Since it was apparent this date was cancelled, ag prices have done nothing but go down daily/weekly without any trade agreement.  Unfortunately, there still isn't any visible progress that either China or the U.S. has made.

Ironically, the stock market has rallied to new highs even though the trade agreement has not happened.  So stock rally with no Chinese trade agreement, but commodities drop like a rock! 

It is becoming more and more apparent who wins and who loses with no trade agreement with China.  

Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.

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