I often have been accussed of being an optimist. I guess that would be true most of the time, but I am also a realist.
I started in the business in 1972 (just before the great grain robbery of 1973). What awesome times and great education those 1970s were. We have not had the potential to have such exciting markets for food, especially corn and soybeans, as we had back then until now. We are entering into harvest, and all you hear is bear rhetoric from who that can't seem to understand the fundamentals that are with us today.
We have a 156 bushels per acre on corn (Informa), 152.9 bushels per acre according to FC Stone, and that is up from the last estimate of 148 bushels per acre. Other estimates as high as 158 bushels per acre. Corn yields are great. Did we not hear from farmers that the early-planted corn looked the best?
I suggest to not get caught up in the talk. Corn values are going up. We have to have acres, and with wheat prices changing world acreage at the expense of oilseeds and corn, corn in the U.S. alone stands to lose 3 million or more acres, and we are not talking about the potential of acreage lost to soybeans if prices indeed decline. We have an in-elastic demand with ethanol on the forefront and a dollar on its face at time of writing.
Southeast Asian economies are phenomenal and strong. Food demand is huge, and don't mistake that big yields means that prices have to go lower like the old days. Not so. Ethanol has changed the corn market forever, unless we change ethanol. I think fund money leaving the equity markets during the next three months is entering that money into the food markets.
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India has 3 million metric tons of wheat yet to buy to fulfill its buffer stocks of 5 million metric tons of imported wheat. Inflation is rampant, and the Indian government is trying to keep the price of food in check.
Corn tries the lows of the sideways range only to find buying. This market has handled bear selling quite well. Why? I think the smart money is friendly. Word has it that Sukup Manufacturing (a well-known bin company) is running 600 bins behind. Demand for storage is good. Everywhere I drive, I see huge bins that are new, so the corn being harvested first will not go onto the cash market. Many producers are sold out of soft red and hard red wheat.
The Southern Hemisphere exports more than half of the world's soybeans. Wheat is taking away cotton seed, rapeseed, canola and sunseed acres. What happens if there is a glich in South American production? The U.S. crop is past, no matter what the yield is. It is about Brazil and Argentina. We need them to increase acres and, with a dollar today making new lows for the year, even with the price rise in soybeans, they may not do so. If the dollar continues to slide, soybeans have to rally harder to make up for lost value.
Pro Farmer found a trend of poorer pod counts in all states except South Dakota and Iowa. Iowa can't make up for the other states, when it was a leading state in switching bean acres to corn this past year.
For the past two months, USDA has estimated the soybean yield at 41.5 bushels per acre. Cropscout traveled 15,000 miles twice to check fields and now estimates yields at 40.758 bushels per acre. That is extremely friendly toward the market and puts even more pressure on the South American crop.
China's pork production will demand more soymeal and, it, too, is experiencing dryness in the northern regions of the Soybean Belt that already had been stressed with dry conditions in July.
The United States with a declining dollar and the only crop available until January will be exporting soybeans, soybean oil and soybean meal. I think the fundamentals are too bullish to be ignored with supply bearishness. This is realism.
