For the past few years, September has not been the month known for weather rallies. Early frost is about the only weather concern that comes in September, and the northern tier states have not been subject to an early frost in years, possibly even decades. But leave it to 2020 to bring us one more hurdle to jump over.
The long Labor Day weekend brought in decent rains to much of the western and central Corn Belt. Iowa received upwards of 2 inches as of Sept. 8, with more coming after. The big question is: Will the late season rains benefit the crop? According to agronomists on the ground in Iowa, the recent rains will not help the corn crop as it is too close to maturity.
But the soybean crop is a different story. It is too late for the soybean plants that have lost their leaves and started to turn yellow, but for the plants that are holding onto leaves and that are green, this rain will help.
But this year it seems that with every good event there has to be an offsetting event, and that was the case here with the recent cold snap that hit the Northern Plains early this past week. Monday night temperatures in western North Dakota were reported to be at or below 28 degrees for more than four hours, which is enough to kill a crop. And it appears to have happened in the southwest corner of the state. Time will tell and more will be known in a week, but any crop still standing in that region (corn, soybeans, sunflowers) will likely see production issues due to the frost. Central and eastern North Dakota and western Minnesota did not see temperatures get as low or for as long of a duration, but the temperatures were low enough to nip the tops of the soybeans in the region. Canada was also hit by the freezing temperatures with reports of damage being done to their wheat crop as well as to their canola, corn, soybeans and sunflowers.
In addition to the weather, the market continues to focus on the U.S. Department of Agriculture's reports. The first report of the week came Tuesday with the release of USDA’s Crop Progress report. The report turned out to be negative to the grains as conditions were better than expected and harvest progress for spring wheat was more advanced than expected.
Corn and soybean conditions were expected to see declines of 2% each, but corn conditions only dropped 1% to 61% good/excellent. Soybean conditions were also expected to see a decline of 2% but instead followed the path of corn declining only 1% to 65% good/excellent. By looking at the individual states, one would have expected to see a bigger decline as all of the major states saw corn conditions decline 1% to 2% expect for Illinois (steady) and South Dakota (which was down 6%). Most of the major soybean states also saw declining conditions except for Indiana and North Dakota (steady) and South Dakota (1% improvement).
Another report the markets were watching for last week was the September Crop Production estimate, which was due out on Friday, Sept. 11. The main question for this report has been not whether USDA is going to cut 2020 production estimates for corn and soybeans, but how much the USDA will cut corn and soybean production.
Early estimates for the report have corn’s yield dropping to 178.3 bushels versus 181.8 bushels last month (3.5 bushels cut or roughly 380 million bushels). Soybean’s yield is estimated at 51.8 bushels versus 53.3 bushels last month (1.5 bushels cut or roughly 130 million bushels). The ending stocks for each of the crops are estimated at: wheat: 924 million bushels (steady), corn: 2.451 billion bushels (cut of 305 million bushels), and soybeans: 465 million bushels (cut of 145 million bushels).
The report is not expected to bring much to the table for wheat as the Small Grains Summary report will be released at the end of the month. The trade is expecting world wheat numbers to see some negative adjustments as most are expecting to see increased production in Canada, Russia and Australia.
Wheat did not get much in the way of positive news last week. On the world front, Australian officials increased their wheat production estimate 1.3 million metric tons to 28 million metric tons versus USDA’s estimate of 26 million metric tons. Kazakhstan is reporting that it will not restrict exports this year and Argentina is saying recent rains have helped its wheat crop to stabilize. Forecasts calling for rain across the U.S. Southern Plains will bring much needed rain to the winter wheat region.
Corn demand remains strong and with recent stories about China’s potential corn shortage, traders are optimistic export demand will continue. Adding to the thought that China will need to import corn to cover its domestic needs, forecasts are calling for heavy rains for much of the major growing regions of China, which is expected to result in more crop damage. The U.S. has the cheapest corn in the world, so it stands to reason that the U.S. should corner the export trade at this point. The only export sale reported this week was from an unknown destination for 102,000 metric tons. But that was not enough to help support corn as technical selling kicked in once corn traded to recent highs.
Soybean demand remains strong as last week saw consistent purchases from China and an unknown destination. For the week China was in and bought 664,000 metric tons and 238,000 metric tons while an unknown destination bought 132,000 metric tons. The USDA attaché in China expects China’s soybean imports to increase by 4.4% in 2020 to 95 million metric tons. The strong demand and production concerns helped soybeans close with gains for 12 sessions in a row before slipping slightly lower ahead of USDA’s Crop Production report.
Technically the grains are overbought and in need of a correction. The report may be the springboard for a pull back and help recharge the market for the next run.
The cattle markets traded in a back and forth fashion this week with most of the activity centered on a lower cash trade and lower boxed beef market. Concerns that restaurant demand is not picking up as fast as hoped is causing demand concerns. Expectations are that supplies of cattle will increase in the short term because producers are being forced to pull cattle off pasture early due to drought concerns.
On the Washington front, the Senate returned to work this week while the House remains in recess until Sept. 15. There are a few House committee meetings this week, so a few House members are roaming around. But it is likely nothing will be done until next week when the full body of Congress is back in Washington. Trouble is, the clock is ticking. Congress will have to act fast as there will only be two weeks left in September to conduct business on two very important bills: the budget and pandemic aid.
The federal government’s budget expires on Sept. 30 and a new budget bill has to be passed by the end of the month. Rumors have Congress pressing the easy button and kicking the can down the road again by passing a continuing resolution that keeps the current budget in place until after the election. This will avoid a shutdown and give whoever wins the election the opportunity to fix the budget.
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