September 4, 2020
Missed some market news this week? Here's the news you need to help you make marketing decisions.
Ag Marketing IQ
Just as the past months have contained some unexpected developments, more surprises—bearish and bullish— will inevitably surface before the next crop is marketed. That means it’s even more important to understand and define price risk management in your business. Risk management requires your constant vigilance. It means planning for the next unknown. History has taught it is easy for a change in fortune to catch us off guard.
Adverse August weather in the Midwest appears to have taken a toll on 2020 production, potentially cutting as much as a billion bushels off this year’s corn and soybean crops. While the true toll from drought and the Aug. 10 derecho windstorm may not be known for months, USDA could make significant cuts in its next monthly estimates Sept. 11. Preliminary August weather data, as well as plunging crop conditions, point to crops smaller than the bin busters forecast by the agency last month. Lower production should support basis in the cash market this fall.
The August USDA crop report estimated that the U.S. soybean crop would reach record yields for soybeans of 53.3 bpa. The analysis for this estimate was likely done in late July. Since then, the crop ratings have begun to take a nosedive and are expected to drop further as the season closes. It is hard to find a year where crop quality has changed in such a short amount of time. It seems the crop condition are changing so much that the crop reports cannot keep up. By the time they get the information out, it is already outdated.
After crude oil futures astonished the world and traded to negative $40.00/barrel back in early April, prices have steadily rebounded. While many commodity prices have been able to rebound back up to pre-COVID 19 sell off prices, most energy prices have not. With many schools opting for virtual learning and parents working from home, Americans are driving less, therefore demand for fuel is less.
Advanced Marketing Class
As harvest, the time is right to ask a question inspired by William Shakespeare: “To store, or not to store?” This question is at the core of a post-harvest marketing plan. To help answer meet my marketing friends, Barney Binless, May Sellers, and Earl Eitheror. Their marketing results over the past 31 years offers some guidance.
Corn and soybean quality has been on the ropes for the past several weeks, and USDA’s latest crop progress report, covering the week through August 30, saw another round of declines for both crops. Corn quality moved from 64% rated in good-to-excellent condition down to 62% this past week. USDA docked soybean quality three points this past week, moving it from 69% rated in good-to-excellent condition down to 66%. The U.S. wheat harvest is moving right along. For spring wheat, 69% of this year’s harvest is now complete, up from 49% a week ago.
Corn conditions in Farm Futures’ Feedback from the Field series slipped last week as hot and dry weather scorched the battered crop and rains from Hurricane Laura over the weekend may have been too little too late, according to FFTF respondents.
Grain prices have found legitimate traction over the past several weeks. Corn prices firmed by around 11% since the first of August, while soybean futures climbed well above $9 per bushel in the past two weeks. The forward momentum has been in large part to a weather rally, but that rally appears to have fizzled out. It’s likely that traders will now await fresh supply and demand from USDA’s September World Agricultural Supply and Demand Estimates (WASDE) report, which will be released next Friday. Listen to the latest Midweek Markets podcast.
USDA’s latest grain export inspection report, covering the week through August 27, was nothing but disappointing, with corn, soybeans and wheat all landing on the lower end of trade estimates and spilling lower week-over-week. Traders mostly shrugged off the latest data, however, with most grain prices moving higher in morning trading.
USDA’s latest weekly export sales report held mostly encouraging data for the week ending August 27. Corn exports led all grain sales last week, thanks to strong new crop sales. Soybean exports landed on the high end of analyst estimates. Wheat sales also made it to the upper range of trade estimates, although week-over-week volume saw a moderate decline.
Export sales were reported four days this week, with China taking 16.6 million bushels of soybeans and 47 million bushels of corn. Unknown took 16.6 million bushels of soybeans and the Philippines took 192,904 short tons of soybean cake and meal.
Wheat prices are mixed this morning as Chicago wheat settles in for a fourth consecutive week of price increases. Soybeans still have a little ways to go before they hit the $10/bushel mark, but futures prices made steady progress towards the benchmark this morning as steady Chinese demand continued to underpin strength in the soy complex. Corn futures rose on hot and dry weather this morning, inflicting further damage to the heat-stressed and wind-damaged crop.
Soybean prices capped off a successful week with another round of technical buying Friday, prompted by export optimism and lingering worries about U.S. production potential – closing the week 1.4% higher. Corn also saw moderate gains today, with relatively drier weather returning to the forecasts next week. Wheat suffered another small setback, meantime, as traders continue to back off five-month highs captured earlier this week.
About the Author(s)
You May Also Like
Current Conditions for
Enter a zip code to see the weather conditions for a different location.
Pros and cons of H-2A guest farmworkersNov 30, 2023
Market expectations: What's on the horizon for grain and livestock?Nov 22, 2023
18 gifts for the farmer on your listNov 27, 2023