8/20/2019 Morning Comments

Good Morning,

Widespread rainfall across the state of Iowa this morning with notable activity in Minnesota as well.  The seven-day period ahead will be a wet one for Iowa, Nebraska, eastern Kansas, Missouri, Illinois and Minnesota.  All of the aforementioned states will see 1.00-3.00” in the coming week, helping late filling corn and soybean crops.  Erasing moisture deficits on August 20th is not the same as erasing them on July 20th, but to say the increased rainfall will not benefit seems foolish.  Above normal precipitation hangs around in the 6-10 day before flipping below normal in the 8-14 according to the CPC’s GFS run.  Temps slowly slip to below normal across the Midwest which takes us out to August 29th.  According to Crop Prophet, the Euro model for week 2 of the 15-day period sees temperatures 5.1-5.3 degrees below normal weighted by corn and soybean production areas.  The GFS is not quite as cool at -4.2 to -4.3 degrees.  The week 3 and 4 outlook from the CFS is under 1.0 degree below normal.  It certainly looks as though September will be cooler than average which does not necessarily mean killing frost/freeze but a late push of GDU’s does not look likely.

Firmer markets overnight with corn leading the way higher, up over 1.0%.  Monday’s session was characterized by weakness with the better than expected rainfall over the weekend and forecast for more in the coming seven days.  Overnight strength would appear tied to the results of the ProFarmer Crop Tour which began in South Dakota and Ohio yesterday.  We dig into the data a bit deeper below with commentary on both legs by friends of ours out in the field.  That ProFarmer is finding smaller crops from a year ago should not be a surprise, but the lack of maturity being noted by all is a bit concerning, especially with below normal temperature forecasts the next 15-days.  While many disagree with the USDA’s acreage estimates, we are here to say they aren’t changing much.  Yield is another story, and bulls who have much smaller yield projections than the USDA could still end up being right.  The question becomes how much supply do we still need to cut in order to make the likelihood of lower demand estimates seem bullish?  Corn open interest fell 5,043 contracts yesterday, soybeans up 2,422, meal down 347, oil up 940, SRW up 3,151 and HRW down 2,225 contracts.

Our friend Peter Meyer hit the eastern leg of the ProFarmer tour, beginning in Columbus Ohio and working east.  Like many, Pete made reference to the fact these crops need 2-3 weeks beyond a regular frost date to reach some semblance of full potential.  The major surprise to him and others, however, were pod counts which came in at 764 average in a 3’x3’ square vs. 1,248 last year and 1,149 on the 3-yr average.  We don’t have the data in front of us going back further, but since 2015, no year has been under 1,065 for a pod count.  The average corn yield was pegged at 154bpa vs. 179bpa last year and would be the smallest since 149 in 2016.  Looking back over the last four years, the ProFarmer Tour generally underestimates Ohio compared with the USDA by 8-10bpa, although in 2015 PF was 2bpa above the USDA.  The name of the game in Ohio is potential vs. reality along with a massive amount of prevent plant.  Needless to say, the prevent plant and acreage story is over for the foreseeable future, so Ag journalists and social media bulls would do well to not dwell on the unplanted fields.  The yield is the story.

In our home state of South Dakota, similar results were found by our friends Nick Ehlers and Jarod Creed.  We have not been in the southeast part of the South Dakota since earlier in the growing season but have heard enough anecdotal reports to confirm the PF Tour findings.  On corn, PF Tour found a South Dakota corn yield of 154.08bpa vs. the USDA at 157bpa and 178bpa last year.  This would still be the second largest South Dakota yield since 2015 and above the 5-yr average of 148.13bpa.  PF Tour does not have a great track record against the USDA, largely because the Tour does not get far enough north and west which can swing the state dramatically.  The average pod count in a 3×3 square totaled 832 pods vs. 1,024 last ear and the 5-yr average of 971.  In general, pod counts should be down across the Midwest given the compressed flowering and pod-set period due to late planting.

Data out yesterday also included weekly crop progress and export inspections.  Corn and soybean conditions both declined by a point which shouldn’t really be a focus at this stage, in our opinion.  The maturity stages are more important to us at this juncture with 55% of the nation’s corn crop in the dough stage vs. 76% average while 15% of the crop is denting vs. 30% average.  68% of the soybean crop is setting pods vs. 54% last week and 85% average.  We worry that soybeans just now setting pods have little if any chance of filling and actually making harvestable soybeans which could keep national average yield ideas under pressure.  Inspections were decent for corn and wheat, but very strong for soybeans.  Inspections totaled 42.6mbu vs. the 18.4mbu needed weekly to hit the USDA estimate.  It will come down to the final two weeks to see if we make the estimate but China taking 20.2mbu of the 42.6mbu was noteworthy.

Bottom Line: Supply narrative is still being debated and ProFarmer yield tweets will remain popular this week.  The trend of immature crops needing an extended finish will be the theme until the tour concludes Thursday in Minnesota.  After that, it all comes down to how long the Upper-Midwest can go without a killing freeze.  Underlying demand remains weak but should start to improve at these lower price points.  Soybeans are the market we want to keep an eye on if yield ideas continue to decline.

Good Luck Today.

Tregg Cronin

Market Analyst




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