Light rains moving across South Dakota and S-ND this morning, but hardly making up for the big miss last weekend. The eastern corn belt is also seeing rain with heavy showers across MI and OH. Several dry days before the next chance of solid rain in the Midwest toward the weekend. NE-SD, KS, MO, IA, MN, WI, IL, IN, OH and MI all have a shot at 0.50-1.50” in total by the end of the weekend. Temps gradually warm throughout the week, getting to the upper-80’s to low 90’s by Saturday. No extreme heat seen, but just warm enough to require follow up moisture on finishing soybeans. Above normal temps and below normal precip look likely in the 6-10 and 8-14 with the most severe below normal precip in the southern plains. Most HRW states have been very-well watered the last 14-days. Largest 2-week percent of normal precip deficits exist across ND, SE-MN, N-WI, E-IA, N-IL and N-MI.
Easier prices across the board this morning led by wheat as the three exchanges add to yesterday’s sharp losses. The rumors of limitations possibly being placed on Russian wheat exports from Friday turned out to be just that, and stories yesterday implied Russia aims to sell 2MMT of grain from government stockpiles in 2018/19. As of August 17th, government stockpiles were 3.7MMT. One minute we are limiting exports, the next we are selling state-owned reserves. As Friday’s charts showed, when Russia placed an embargo on exports in 2010/11, they watched their share of global wheat trade fall from 13.54% in 2009/10 to just 3.00% in 2010/11. In 2009/10, their 13.54% export share was the fourth largest among major exporters before watching it fall to the absolute lowest that year. It is highly unlikely they would make the same mistake again, even if the export limitations are only partial. Not to mention, Black Sea FOB prices remain sharply lower than both US and EU wheat offers, so it is difficult to take any talk of export limitations seriously until the FOB gap has been closed. The ProFarmer tour continues today with big yields being found in the WCB as we discuss below. Open interest changes yesterday saw corn down 8,327 contracts, soybeans were down 2,659, SRW wheat was up 2,146 contracts and HRW was up 3,321.
Data yesterday included weekly export inspections which were on the low-side for all major grains. Wheat inspections were 12.7mbu vs. the 20.5mbu needed weekly to hit the USDA forecast. Total inspections are down a ridiculous 37.8% from this time a year ago with 2017/18 exports notching the third lowest export total of the last 15-years. Very poor start to the export season with second half commitments needing to be almost record large. Corn inspections totaled 43.2mbu vs. the 44.5mbu needed weekly. Total inspections of 2.170bbu are down just 0.3% from a year ago, and should come very close to meeting the USDA’s forecast. Soybean inspections totaled 23.5mbu vs. the 25.6mbu needed weekly. Total inspections are down 3.2% from a year ago at 2.005bbu. Like corn, soybean inspections will come down to how much is forced out the door the next two weeks and how much is rolled to new crop.
Also got the latest crop progress report which carries limited value until harvest progress begins to be reported next month. National conditions fell 2pts to 68% G/E vs. 62% G/E a year ago, a phenomenon which occurs every year as the crop turns color and dies. Largest declines were in the upper-Midwest where moisture stress has been present for several weeks. Corn denting progress was estimated at 44% complete vs. 26% last week and 26% average. Many corn belt states are double their average dent progress which should lead to a swift harvest. Soybean conditions declined 1pt to 65% G/e vs. 60% last year. Big declines in ND/SD/MN as moisture stress turned soybean gray in color and cut potential. Spring wheat conditions also declined 1pt to 74% G/E and vs. 34% G/E a year ago. Spring wheat harvest is 60% complete vs. 35% last week and 44% average. SD is essentially done with harvest while ND crossed the 2/3’s complete line this week. Winter wheat harvest is 97% complete.
The ProFarmer tour had scouts in South Dakota and parts of Nebraska as well as Ohio and parts of Indiana yesterday. The tour released data for SD and OH, but will issue final numbers for NE and IN tonight when more data is compiled. One of our good friends, Pete Meyer, is leading a car on the eastern leg and confirmed the good yield potential in Ohio. The tour found an average corn yield of 179.57bpa vs. the USDA’s current 180.0bpa although he made sure to point out they only sampled the western half of the state. He noted the much higher percentage of corn dented than normal, so what they had in their hands is likely to be closer to what the crop actually is than normal. With that said, last year’s yields benefited from a long, cool August which helped to maximize grain fill while this year’s crop is already through that critical stage. Normal kernel depth was noted. Pod counts in Ohio were estimated at 1,248.2 vs. the 3-yr average of 1,149.39. USDA is estimating soybean yield up 13% y/y. Big yields were also found in South Dakota, but only three reporting districts are sampled in SD, and the largest corn production county in SD (Brown) is not. That said, the tour found an average yield of 178.01bpa vs. he USDA at 170bpa, both of which would be new records by 7-8bpa. The 3-yr average for SD is 147bpa. We think the early potential for South Dakota corn has been cut due to dryness in the northeast the last 30-45 days. Soybean podcounts were seen at 1,024.7 vs. the 3-yr average of 961.95. Here again, it is difficult to think South Dakota can reach its full soybean potential given the dryness and heat during the first half of August during such a critical period for soybean development. Any crop tour faces large challenges in trying to amass enough data to be statistically significant. ProFarmer Tour is the best we have, and the trade will focus on Iowa and Illinois Wednesday which could sway the entire national yield estimate.
One last note, an interesting article came across our desk this weekend from www.zerohedge.com about Russia offering farmland to China. One of the major talking points about the trade war has been the fact if it lasts long enough, it will force China to diversify its suppliers and even encourage production in other parts of the globe. The report on ZH said Moscow offered China 2.5 million acres of arable land to Chinese farmers to help meet its demands for soybeans. There is some discussion about the quality of this farm land, and whether the best land in the Far East Russian cropping belt had already been picked over. We are skeptical about reading into or using anymore of the data in this article as it links to other stories which are littered with falsehoods and data which is clearly inaccurate. Nonetheless, the idea of China outsourcing and acquiring land in other countries is not ridiculous. The longer this trade war drags on, the more severe the implications for US farmers. Every tonne of soybeans China can get outside of the United States is one more tonne they don’t have to come back to the US for when the trade war is over. China has much more leverage with smaller countries than it does with the United States and would gladly take more beans from a Uruguay a Canada or a Ukraine. The clock is ticking.
Bottom Line: Soybeans continue to stand in at these prices much better than the recent moisture across the Midwest would suggest. The ProFarmer tour is finding big yields so far but a lot of the tour remains. Wheat cannot continue to rally with the US offering wheat so far above the market. Wheat export sales will fall, shipments remain terrible and the world will make due before it has to rely on overpriced US wheat. The market always underestimates the resolve of the Northern Plains farmer to hold wheat off the market when he is not satisfied with prices. He is doing that so far with his spring wheat, but without an export demand pull, the domestic market is not large enough to give him the price he wants.
Good Luck Today.
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