8/21/2019 Morning Comments

Good Morning,

More rain in the Central Plains and Western Corn Belt this morning with the current front finishing up later today.  Another large system will work through the WCB toward the weekend, bringing with it heavy moisture.  As of this morning’s GFS runs, Iowa, Minnesota, Missouri, Eastern Kansas and Eastern parts of the Dakotas will see totals ranging from 1.00-4.00”.  There will be no moisture deficits left in the central/west corn belt after this week but the question is whether the rain arrived soon enough.  Extended maps from NOAA continue to feature below normal temperatures the next 15-days with that trend likely to continue into the week 3&4 outlook.  Precip gradually switches from above normal in the 6-10 to below normal in the 8-14 for most of the Upper-Midwest.  We have not seen anyone call for a frost/freeze in the U.S. yet, but the cooler than average temps will keep tensions high.  Frost was noted in Canada to begin the week, ending the growing season for some in the north.  According to Crop Prophet, the temperature models for week 2 of the 15-day on both the GFS and Euro trended a bit warmer overnight, although both still feature temperature departures 3-4 degrees below normal.  The 30-day CFS Ensemble features below normal temperatures as well, but only 1-2 degrees.  Either way, finishing heat is not expected through the middle of September.

Mixed markets overnight with row crops higher and wheat markets once again trending lower.  U.S. wheat export demand should improve from a year ago, especially considering the fast start to the marketing year.  That said, fulfilling the higher export forecast is contingent on second half demand showing back up as Russian and French offers are currently cutthroat.  Paris Milling wheat futures hit fresh contract lows yesterday, and are lower overnight, dragging U.S. futures lower as we try to maintain competitiveness.  Row crops continue to focus on the ProFarmer crop tour which made its way through Indiana and Nebraska on Tuesday.  More of the same was reported with immature crops in most locations.  The largest takeaway for us and our friends on tour is the lack of pods on the soybean plants.  In corn, the potential is there but the maturity is not.  In soybeans, it would appear neither the potential nor the maturity is there.  Open interest changes yesterday included corn down 6,548 contracts, soybeans up 3,168 contracts, meal up 1,707, oil up 954, SRW down 1,271 and HRW up 2,612.

The ProFarmer Tour reported an Indiana corn yield of 161.46bpa vs. the USDA at 166bpa and 182.33bpa last year.  Looking back at history, a consistent theme is present with PF tour yields in Indiana much like South Dakota and Ohio: PF typically comes in under the USDA by several bushels per acre.  This year’s Indiana yield estimate is the lowest since the 144.68bpa they found in 2015 and well below the 3-yr average of 175.81.  Our friend Pete Meyer did note that western Indiana looked markedly better than eastern Indiana, and also much more mature.  Pod counts in Indiana totaled 923.94 vs. 1,304.55 last year and 1,212.60 on the 3-yr average.  While this is not the way to extrapolate yield, if we take the percentage change of pod counts y/y, it comes to 29% which would imply a y/y yield change of 16.9bpa.  That would suggest an Indiana state yield of 41.5 vs. the USDA’s current 50bpa.  It isn’t that simple, but I think it is important to note the huge drop in pods this year vs. the last several.

In Nebraska, some really good corn was found by our friends on that leg which should not be too big of a surprise considering the favorable planting season and growing conditions much of the summer.  One big observation from scouts Nick Ehlers and Jarod Creed was the lack of hail and greensnap damage which is always prevalent in Nebraska.  PF estimated the Nebraska corn yield at 172.55bpa vs. 179.17bpa last year and the 168.97bpa on the 3-yr average.  The PF tour always underestimates Nebraska vs. USDA, which they acknowledge, because of the higher proportion of dryland fields sampled vs. irrigated.  Pod counts in Nebraska totaled 1,210 vs. 1,299 last year and the 3-yr average of 1,170.  Here again, Nebraska looks solid on soybeans and much better than most of their counterparts across the Midwest.

The other big news item yesterday was POET announcing they were idling their Cloverdale, Indiana ethanol plant due to recent decisions made by the Trump Administration regarding small refinery exemptions.  The Cloverdale plant grinds 30 million bushels annually, and the press released went on to say total grind will be reduced by over 100 million bushels at its other facilities in Iowa, Ohio, Michigan, South Dakota, Minnesota and Missouri.  POET is the largest ethanol producer in the United States, having secure the top spot in 2018 from ADM.  The release paired with a statement from Marquis Energy which said it was reducing production rates at its 100-million-gallon-a-year plant in Wisconsin.  The releases were said to send the Whitehouse into a frenzy trying to find ways to “pacify” Midwesterners heading into the 2020 election.  If there is anyone in the Whitehouse listening, producers do not want another handout nor something to keep us pacified.  We want our demand base back. 

Bottom Line: Temperature forecasts and crop tour observations will continue to be the theme this week.  No one knows when the first frost of the year will impact the Midwest, but trends do not look favorable into mid-September.  As we noted above, the difference between corn and soybeans is the potential and lack of potential.  The former has it.  The latter would not appear to have it.  Soybeans have a more comfortable balance sheet coming into the marketing year, but a severe drop in yield from a year ago could snug things up quickly.  Still a demand issue in both crops which seems omnipresent. 

Good Luck Today.

Tregg Cronin

Market Analyst




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