The grains struggled to start the week with harvest pressure and favorable weather forecasts causing most of the selling pressure. Corn harvest is advancing (although slower than expected) as is soybean harvest. So far, early yield reports have been better than expected. That is not to say there aren’t areas that are reporting poor yields, just that most areas are seeing yields better than they were expecting.
The Sept. 28 U.S. Department of Agriculture Crop Progress report was neutral to negative to the grains. The report was neutral corn due to slower harvest progress than expected but negative soybeans due to better than expected crop ratings.
Corn conditions remained unchanged at 61% good to excellent, as expected. Most of the major producing states saw conditions change by only 1% except for Illinois which was down 2% and Ohio which improved by 4%. The surprise in corn was harvest progress. As of Sept. 30, only 15% of the nation’s corn was harvested versus expectations of 20%. Corn harvest is right in line with the long-term average pace.
For soybeans, crop rating improved 1% to 64% good to excellent. This was a surprise to the market, as most were looking for soybeans rating to remain unchanged. And like corn, most of the major soybean producing states saw conditions on either side of 1% with Nebraska dropping 5% and Ohio improving by 2%. Soybeans are 20% harvested, 2% ahead of expectations and 5% ahead of average.
Weather added to the selling pressure as the U.S. forecasts for corn and soybeans are negative. But what is negative for corn and soybeans is friendly wheat. U.S. weather forecasts are calling for cold but dry conditions in the short term, followed by warmer drier air. The forecast will help advance corn and soybean harvest but will hinder the emergence of newly planted winter wheat.
The Black Sea region is extremely dry, and planting is slow, but rain is in the forecast for next week to 10 days. Brazil is in the same boat as conditions are extremely dry in much of the country which is not affecting planting as of yet. Rain is in the forecast for later next week. Brazil’s first crop of corn is 32% planted versus 21% average.
Exports have tried to overshadow the negative weather forecasts, but with little luck. This past week, the reported export sales included the following: For corn, Japan bought 111,000 metric tons and an unknown destination bought 207,000 metric tons; for soybeans: 218,000 metric tons went to an unknown destination, 100,000 metric tons went to Mexico, 215,000 metric tons went to an unknown destination, and 120,000 metric tons went to Egypt. To date, China has bought 10 million metric tons of U.S. corn versus 60,000 metric tons last year and 20.6 million metric tons of U.S. soybeans versus 3.6 million metric tons last year.
After 17 weeks into the marketing year, wheat shipments were at 35% of USDA’s expectations versus 32% last year while wheat’s export sales pace is at 53% of USDA projections versus 49% last year. With 35 weeks left in wheat’s export marketing year, shipments need to average 18.2 million bushels and sales need to average 13.2 million bushels to make USDA’s projection of 975 million bushels.
After four weeks into the marketing year, corn shipments were at 5% of USDA’s expectations versus 3% last year while sales are at 42% of USDA’s projection versus 22% last year. With 48 weeks left in corn’s export marketing year, shipments need to average 46.2 million bushels and sales need to average 28.2 million bushels to make USDA’s projection of 2.325 billion bushels.
After four weeks into the marketing year, soybean shipments were at 8% of USDA’s expectations versus 7% last year while sales are at 66% of USDA projections versus 31% last year. With 48 weeks left in soybean’s export marketing year, shipments need to average 40.6 million bushels and sales need to average 15.1 million bushels to make USDA’s projection of 2.125 billion bushels.
But the early week sloppiness changed to all-out buying on Sept. 30 once USDA released its September Quarterly Grains Stocks report and Small Grains Summary estimate.
To say that the Quarterly Grain Stocks report and Small Grains Summary took the market by surprise would be an understatement. The market was somewhat being lulled by harvest pressure and the lack of export news due to China being on holiday. No one was expecting the stocks estimate to trim supply as much as it did. With revised increased old crop production, the drop in stocks was due to demand. For corn, feed demand has been stronger than expected as the U.S. is increasing inventory of cattle, hogs and poultry. The two major demand sources for soybeans are reported monthly (crush and exports) so where the increase in demand is from is a bit tougher to determine.
First off, USDA decided that they would revisit 2019 corn and soybean production in this report. USDA put 2019 corn production at 13.62 billion bushels, 13 million bushels above expectations and 3 million bushels above last month (due to a slight increase in yield). Soybean production was estimated at 3.55 billion bushels, 23 million bushels below expectations and but in line with last month.
The Quarterly Grain Stocks estimate put wheat stocks at 2.159 billion bushels, 83 million bushels below expectations and 187 million bushels below last year’s estimate. Corn stocks were estimated at 1.995 billion bushels, 255 million bushels below expectations and 226 million bushels below last year’s estimate. For soybeans stocks were estimated at 523 million bushels, 53 million bushels lower than expectations and 386 million bushels below last year.
The Smalls Grains Summary was not a big market mover, but it was also friendly wheat. All wheat production came in at 1.826 billion bushels, 15 million bushels below expectations and 12 million bushels below last month’s estimate. Winter wheat production was estimated at 1.17 billion bushels, 27 million bushels below expectations and 27 million bushels below last month. Other spring wheat production was estimated at 586 million bushels, 9 million bushels above expectations and 9 million bushels above last month.
Wheat continues to see support from dry conditions, not just in the U.S. Southern Plains but also in the Black Sea region as Russia continues to miss significant rains. This will keep wheat on its toes as the Black Sea region is the largest exporter of wheat in the world, and a hiccup in production there will send ripples through the world wheat export market. Ukraine officials report winter wheat acreage will decline 9% to 6.1 million hectares due to drought concerns. Planting progress is at 25% complete and the slowest pace in over 10 years.
Last week’s ethanol production report did not bring encouraging news. Last week’s production was estimated at 881,000 barrels per day, a decline of 25,000 barrels per day from the previous week. This puts production at its lowest level in 15 weeks. Stocks were estimated at 19.691 million barrels, a decrease of 306,000 barrels. This is the lowest level of stocks since December 2016.
For the month of September, December Minneapolis wheat gained only 0.75 of a cent, but December Kansas City wheat picked up 34.5 cents, December corn gained 21.25 cents, and November soybeans increased by 70 cents.
Cattle traded in a back and forth fashion this week. The live cattle market saw a little better strength due to strong cash offers. Cash activity has taken place between $105 and $107 with most at $106, $2 above last week. Feeder cattle have not had the same strength as the live cattle, mainly due to pressure from the higher grain markets. This is also the time of year when feeder cattle supplies increase dramatically as producers start to pull calves off pasture. There is a bit of a disconnect between cash prices for feeders and futures as feedlots remain aggressive buyers of calves. The expectation is that most are looking for an increase in beef demand into the first quarter of 2021 and the calves being placed now will be ready to meet that demand. This idea could be derailed if the economy stumbles.
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