Harvest progress was 75% across the United States as of Sunday night even though here in the panhandle of Nebraska we are probably only at 10%. Sugarbeets are the priority and it’s just as well since the moisture on the corn is still in the high teens. Year to date the US has harvested 75% of its corn with an estimated average yield of 168 bu/acre which comes out to approximately 10.166 billion bushels. This is more corn than the total harvests of 2001 and 2003, and we are only 75% done.
Seasonally, the corn market tends to rally from now into December. In 2014 corn hit its low around this time and rallied $0.80 over the next several weeks due primarily to competition between soybeans and corn for acres. This year, corn made its low back in the beginning of September and has rallied $0.20 since then. Many analysts believe a rally as large as last year is impossible due to the fact that corn inventory and production are large this year.
Trade is concerned about the slow pace of exports this year. China could buy 50% less corn as the government subsidizes the use of domestic corn. China reports that 25% of the 80 million metric tons of corn they have in storage is damaged so badly it cannot be used for food or feed purposes. China plans on increasing ethanol manufacturing by 200 million gallons per year to absorb these corn reserves. The economics behind this is seriously in question with margin calculations coming up negative.
Wheat prices rallied significantly on Monday in response to flooding rains impacting the Winter Wheat crop across the deep South and the surprising fact that funds are shorter than expected. Since the closing of the live trading pit in July, trade has a harder time keeping track of contract positions between the weekly reports.
Reminder: Merchant Plus Marketing Deadline is Sunday November 1
Early morning out the back door at Farmer’s Coop main office.
Harvest is marching on and was 42% done in the US on Sunday night. Yield reports from the corn belt say yields are higher than expectations in many areas. Storage space is becoming an issue must faster than normal this year due to a larger than expected soybean crop and the large amount of 2014 corn still in storage. This could have an impact on basis values later in the season.
Analysts are concerned with the level of corn demand this year as they look at the lagging export numbers. The US historically exports approximately 15% of its corn and even though domestic demand is expected to be higher, it can’t hope to offset the reduced export demand. The US Dollar is still strong vs Brazilian and Argentina currencies. Brazil is currently offering corn at a price $0.35 less than the US. This difference is so large that it is becoming more cost effective to import Brazilian corn into the Southeast US feed market than pay for US corn.
Farmer’s Coop has been receiving dryland and hail damaged corn as producers try to fill the time when they can’t harvest sugar beets. Moisture has been averaging about 17% and test weights have been low due to the large amount of hail damaged corn being received. Irrigated corn moisture tests have been coming in 20%-25% moisture. Preliminary dryland sunflower moisture tests have been around 10%.
Wheat prices fell through some technical support on the charts on Wednesday which spurred more selling and led to drops further below other technical support levels on Thursday and Friday aided by the release of the seasonal drought outlook. Wetter forecasts relieve drought concerns and put pressure on prices. The drought outlook showed a much improved long-term outlook for drought areas in Texas, Southern Oklahoma, and Arkansas. This area accounts for approximately 15% of the wheat crop.
Areas around Texas and Southern Oklahoma expected to see some moisture improvements.
Weather is the main player in the wheat market as producers try to get their Hard Red Winter wheat crops planted. Analysts are debating yields for the coming year and whether or not the current El Nino trend will turn into La Nina. In the past, strong El Nino patterns have transitioned into La Nina patterns in the spring and have resulted in droughts.
Corn Harvest Weekend Numbers
Corn harvest is in full swing with 27% of corn being harvested in the US as of last night. This is compared with 18% last week and 16% last year. Yield reports are coming in average to good but lower than last year. However, many forget that last year set yield records in many places so a reduction in yield this year shouldn’t be extremely disappointing. FCStone released its production survey on Thursday indicating an estimated yield at 167. Informa followed with their production estimate on Friday estimating corn yield at 168.4. The USDA Supply and Demand report comes out this Friday and we will see if they change anything from their September estimate of yield at 167.5.
Below is a graph of Corn yield estimates from FCStone, Informa, and the USDA.
FCSTone, Informa, and USDA’s yield estimates for 2014 and 2015
Although production is important, it is still only half of the story. The other half is usage and can be just as important as production. Trade is concerned that export sales are low this year. The US Dollar is relatively strong compared to the rest of the world and the Brazilian Real is extremely weak. This makes South American crops less expensive than US crops when it comes to foreign interest. This time of year we usually see a shift in demand from South America to the US for soybeans and corn but that shift is slower this year. If exports don’t pick up we could see a further building of old crop stocks.
The following are accumulated weekly exports for corn and wheat.
The USDA released their Stocks and Acreage report on September 30. The wheat stocks estimate and the 2015 wheat production estimates were both lower than trade was expecting. This spurred a slight rally in wheat and brought us to highs that haven’t been seen since early August. There is very little news involving wheat except that many areas are dry as they try to get 2016 crop in the ground. This may cause increases in costs of production if there is a lot of re-planting. Farmers are reluctant to sell old crop wheat due to low prices and very little wheat is moving through the market.