ProFarmer Tour results show worse corn and soybeans than expected, lifting markets
The tour is crossing the Corn Belt assessing the potential of this year’s corn and soybean crop. The tour results are showing drastically worse crops than expected in some states.
Editor's note: Catch Randy Martinson every Friday after markets close on the Agweek Market Wrap at agweek.com.
The grains wrapped up the third week of August posting losses. Wheat and corn were able to trim the week’s losses on Aug. 19 while soybeans added to their losses.
Wheat was the worst performer with most of the selling tied to poor demand, reports of more ships being loaded with Ukraine wheat leaving the ports, as well as from improving weather conditions in both the northern Plains and southern Plains. Weather forecasts are calling for good rains for the southern Plains, which will help entice producers to plant more winter wheat. Although prices have dropped over $5 in the past 60 days, producers will take the little risk they have and plant winter wheat south of Interstate-90 and will look to double crop the wheat with either sorghum or soybeans. The weather in the northern Plains is expected to remain warm and dry, which will help harvest progress advance.
The sell off in wheat was enough to bring the September Minneapolis and September Chicago wheat contracts to a new low for the year. Kansas City was able to hold onto some of its premium as it tries to entice producers to plant winter wheat this fall. The selloff also took the Minneapolis and Chicago exchanges to major support lines which they were able to bounce off. That in turn resulted in a bit of profit taking on Aug. 19.
Soybeans struggled as well with most of the selling tied to expectations of a larger U.S. crop. U.S. crop conditions remain strong which has many traders looking for USDA to increase yield once again.
Corn was the best performer, losing ground early in the week only to see strength push corn higher late in the session. Production concerns and talk of increased demand helped support corn late in the week. Reports are that the hot dry conditions are starting to cause concern in China, as China continues to experience one of the worst heat waves in history. China will need to reevaluate their production estimates and recalculate the amount of grain they will need to import. The supply concerns have been enough to bring China back to the U.S. as a buyer of U.S. soybeans. The previous week China was in buying and so far during the fourth week of August China bought 627,000 metric tons of U.S. soybeans.
Wheat exports continue to be poor. That was once again confirmed by the weekly export sales estimate. At this time wheat exports are at the lowest pace in four years and the second lowest pace in 13 years.
Corn and soybeans posted gains to close out the third week of August with another change in the weather forecast lending support. Once again, rain was pulled out of the short-term weather forecast for Iowa. Iowa continues to see drought conditions increase. The Aug. 18 Drought Monitor map once again increased the area of drought in Iowa, Nebraska, Kansas, and Oklahoma. It appears that the western Corn Belt will once again see lower crop ratings.
The fourth week of August saw a complete reversal of the previous week. The grains started the week sloppy and extending losses in wheat and corn, while soybeans were able to hold onto small gains. Pressure in wheat and corn came from the stronger U.S. dollar and reports of more ships leaving Ukraine ports over the weekend.
Soybeans were the bright spot with early support came from reports that China has called a state of emergency due to the heat wave. This has many traders expecting China’s need for grains will increase which means more soybean and corn export business for the U.S. Hot dry conditions in Europe continues to be supportive as well as it appears that the EU will need to import corn to meet demand.
Support also came from the Pro Farmer Tour. The tour is crossing the Corn Belt assessing the potential of this year’s corn and soybean crop. The first day of the tour was in South Dakota and Ohio. Most of the trade was expecting to see a tough crop in South Dakota but a good crop potential in Ohio. The trade was surprised to see that was not the case.
South Dakota’s crop was a little worse than expected with the final yield coming in at 118.45 bushels per acre versus 151.45 bushels per acre last year and the three-year average of 161.59 bushels per acre. USDA’s August estimate was 147 bushels per acre Soybeans pod counts were also lower coming in at 871.4 versus 996.86 last year and 1,026.86 for the three-year average.
Ohio’s crop was worse than expected with the corn yield coming in at 174.15 bushels per acre versus 185.06 bushels per acre last year. The three-year average was 169.03 bushels per acre and versus USDA’s August estimate of 190 bushels per acre. The soybean pod count was at 1,131.64 versus 1,195.27 last year and 1,038.35 for the three-year average.
The second day of the tour went through Indiana and Nebraska and as expected, found a poor crop in Nebraska, but again a surprisingly lower than expected crop in Indiana. The estimate for Nebraska corn was at 158.53 bushels per acre versus 182.35 bushels per acre last year, 176.68 bushels per acre for the three-year average, and versus USDA’s August estimate of 181.0 bushels per acre. Nebraska’s soybean pod counts came in at 1,063.7 versus 1,226.43 last year and 1,245.06 average.
The estimate for Indiana’s corn was at 177.85 bushels per acre versus 193.48 bushels per acre last year, 178.26 bushels per acre for the three-year average and versus USDA’s August estimate of 189.0 bushels per acre. Indiana’s soybean pod counts came in at 1,165.97 versus 1,239.72 last year and 1,148.26 average.
The friendly news being generated from the findings of the tour has helped corn to trade over its 50% retracement of its recent trading range. December corn had to trade above the $6.65 level to cross the 50% retracement.
Soybeans have been trading above the 50% retracement level for quite some time and are now flirting with the 67% retracement level of $14.87.
Farm Service Agency was finally able to release their August estimates for planted and prevented planting acreage. Of course, these are just the first round of numbers as USDA will be updating these monthly through October. FSA estimated prevented planting acreage for the U.S. at 6.386 million acres versus 2.1 million last year. This is the third highest prevented planting acreage in seven years. Corn prevented planting came in at 3.148 million (640,000 last year) with North Dakota the leader at 1.185 million. Soybean prevented planting acres were estimated at 987,000 acres (341,000 last year) with again North Dakota the leaders at 522,000 acres. Spring wheat prevented planting acres were at 1.16 million (293,000 last year), with North Dakota claiming 600,000 acres.
The market also got a shot in the arm from the Aug. 22 Crop Progress report, which continues to show a lower rated crop that expected. Corn’s crop condition rating was expected to remain steady or improve slightly this past week, but instead conditions declined 2%, putting the crop at 55% good/excellent. The states that saw declines this past week was Illinois down 3%, Nebraska down 5%, North Dakota down 1%, and South Dakota down 2%. Soybean conditions were also lower than expected, dropping 1% to 57% good/excellent. The states that showed declining conditions were Illinois down 1%, Iowa down 1%, Nebraska down 2%, and North Dakota down 4%.
Spring wheat conditions came in as expected, unchanged at 64% good/excellent. Only Montana saw declining conditions, dropping 7%. Spring wheat harvest is more advanced than expected as 33% of the crop is already in the bin.
Cattle posted gains to close out the third week of August, making this the third week in a row cattle have posted positive gains. Support continues to come from tight supplies and expectations that supplies will only get tighter into the new year. Cash bids have started to increase as well adding strength to the live cattle. Feeders were seeing spill over support from the lower grains. But USDA’s August Cattle on Feed report was not friendly cattle. On feed numbers came in as expected, which was the second highest for the August report since the series began. Placements were negative coming in at 102% of a year ago, and 3% above expectations. Marketing was estimated at 96% of a year ago, which was 1% below expectations. The report was negative and did pressure cattle the fourth week of August.
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