Crop Conditions and Market Prices - Friday, 08 July 2016

The last week has had a lot of fireworks but unfortunately many of them were ignited by the USDA’s latest bearish report.  Even with the massive downturn in prices the Funds are still thought to own close to +100,000 long corn contracts on the board.  If this is true then there is still the possibility of prices moving lower if they decide to get out of those positions.  In addition to those negative factors:

  • Argentina’s corn is now becoming more price competitive in the global market.
  • Brazil is approximately 25% done with the harvest of the 2nd crop which is way ahead of normal.
  • U.S. corn crop is entering pollination with one of the best crop condition ratings at this stage in history. (The current Good to Excellent corn rating of 75% was raised from 72% during the last week of May into the first week of June and has remained there since)
  • Some analysts are now increasing their yield estimates higher, many are now predicting an average between 168 -172 bushels per acre.
  • We currently have an enormous supply of ethanol on hand and the price per gallon is not competitive with unleaded gasoline.

Yesterday CONAB lowered their estimate of the Brazillian corn crop to 69.1MMT’s from a previous estimate of 76.2 MMT’s, this is an -18% decrease from last years production of 84.7 MMT’s.  This is  considerably short of what many in the trade have been expecting and the USDA’s recent estimate of 77.5 MMT’s.  With this new yield forecast in mind many analysts have lowered Brazillian ending stocks to near zero on the balance sheets, this would mean the country will either need to begin importing more corn or find ways to cut demand.

In addition to the  ratings found on the map the USDA reports that 15% of the corn crop has now begun silking compared to 10% a year ago and the average of 13%.  A few of those are:

  • Iowa 6%
  • Indiana 11%
  • Illinois 22%
  • Missouri 57%
  • Minnesota & Wisconsin 0%
  • Nebraska 10%

Global economic uncertainty continues to influence soybean prices.  Complications from the European Union are causing financial experts to worry about how a “major global macro imbalance” will affect other economies and they warn that the “Chinese economy might be next to face a historic economic crisis”.  China accounts for 65% of the total global agriculture import market, if their finances suffer it is likely that global demand for soybeans will suffer as well.

CONAB also adjusted their estimate for Brazil’s soybean crop and slightly lowered the production from 95.6 MMT’s to 95.3 MMT’s.

The USDA lowered their soybean ratings by another -2% this week.  The current Good to Excellent rating of 70% is still higher than last year’s 63% Good to Excellent rating and as a reminder the U.S. saw a record yield of 48.0 bushels per acre…  In addition to the ratings found on the map the USDA reports that 22% of the U.S. soybean crop is now blooming versus an average of 16%.

 

Kevin VanTrump of the VanTrump report offered an encouraging statement for everyone to consider, “Like most all bulls, I believe it’s way too early to be talking about record U.S. soybean yields.  In fact if Chinese demand stays strong and complications in South America stay constant, the U.S. balance sheet will need record yields to balance the books.”

The U.S. map below indicates the rainfall forecast from yesterday, July 7 through Sunday, July 10th

             

Over the last several weeks some weather forecasters had been discussing the possibility of a “flash drought” developing. Last week the abnormally dry and moderate drought areas were expanding during a critical period in crop development but recent widespread rainfall and cooler temps have erased those concerns in most areas.

A major heatwave is expected to arrive by the 3rd week in July soaring temperatures from the mid 90’s to low 100’s for areas in the dark red.  Get the air conditioners ready!

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