Some Issues Facing S.A. and the August Outlook - Thursday, 21 July 2016

DEC16 new crop prices for corn have receded below $3.50 per bushel.  The record harvest of 14.215 billion bushels in 2014-15 brought corn prices down below $3.20 for a short time but since then producers have not had to deal with prices below $3.50 for any prolonged time frame.  This year expectations are for production to exceed the previous record with total production estimated to reach 14.5 billion bushels on approximately 86.6 million harvested acres. Compare this to 2014 when the record breaking yield was harvested on just 83.1 million acres, that’s -3.5 million less acres than we will harvest this year.  USDA continues to report that the U.S. is experiencing some of the best crop conditions in years and even with the excessive heat hitting key growing states this week the current crop conditions are thought to good enough to withstand any upcoming heat stress.  Crop historians would also tell us that it’s unlikely that this season’s corn crop would yield below trend-line given the current “Good to Excellent” rating at this point of the growing season.

The harvest of 2014 leads in the record book when the national yield soared to 171 bushels per acre. A comparison of crop conditions from July 20, 2014 to July 17, 2016 was prepared by The Van Trump Report and several of their state-by-state comparisons are shown below:

  • STATE           Good-Excellent 2016               Good-Excellent 2014
  • Iowa                        81%                                                    77%
  • Illinois                     80%                                                    81%
  • Indiana                   74%                                                    76%
  • Minnesota             82%                                                    64%
  • Nebraska                80%                                                    76%
  • Ohio                        64%                                                     75%
  • South Dakota        63%                                                     78%
  • Kansas                    69%                                                     64%
  • Wisconsin              86%                                                     76%

While the corn crop seems prepared to weather the current and upcoming heat stress predicted, the trade is less confident that soybeans will fare as well with the lingering heat stress and the less than ideal rainfall expected into August. This week the USDA reports that 59% of the nation’s soybeans are blooming, which is 10% higher than last year and soybeans setting pods sits at 23% compared to just 5% a year ago. The Good to Excellent soybean crop conditions rating for this week was reported at 71% compared to 62% last year.


All is not well in South America.  Truckers in Argentina have begun an “open ended” strike over hauling rates. This strike halts the transport of newly harvested corn and soybeans to port by 180,000 trucks.  It’s not likely that this will slow exports unless it were to last for an extended period of time since there appears to be sufficient reserves in place at the ports to last for several days.  The strike is also not expected to have any effect on U.S. markets at this time, the trade will need to see that a prolonged situation is occurring before they would become concerned.

Another situation facing producers in Argentina is the announcement by Argentina’s Ag Minister that due to the current economic situation facing the country the government will not be reducing soybean export taxes any further as they had promised earlier. (The government itself has not yet confirmed this statement) The newly elected president eliminated the export tax completely for corn and wheat and had begun the process on soybeans. Initially they lowered the export tax from 35% to 30% and had planned to drop it by an additional 5% now and continue to lower the tax by 5% each year until it was eliminated. If this tax reduction does not occur it’s quite possible that Argentine producers will plant fewer acres to soybeans.

The Brazilian state of Mato Grosso has now harvested 50.6% of the corn crop (slightly ahead of the normal pace) according to the Institute of Agricultural Economics (Imea).  Mato Grosso is the largest corn producing state in the country but the unfavorable weather since April has severely damaged the safrinha corn crop.  Imea has lowered their expectations to 22.2 million tons which is a 22.8% decrease from the production of 2014/15.  Producers believe that this newly adjusted estimate is still too high and think that the final production may be closer to 17 or 18 million ton if not even lower. According to Corn and Soybean Advisor, “Carryover stocks in the state are expected to fall to just 70,000 metric ton or a 7-day supply for the livestock industry within the state!”

This growing season has not been pleasant nor profitable for a majority of producers in Brazil and according to Climatempo meteorologist, Alexandre Nascimento, producers have more challenges ahead.  Climatempo expects that La Niña is likely to impact the planting and overall production for 2017.  “The South, Southeast and Center-West should see temperatures slightly above average, while the North and Northeast should be hotter.” The forecast from Climatempo expects, “La Niña will arrive in October and last the duration of 2017 bringing higher temperatures and the possibility of drought in the South during the winter/spring of 2017. With above average rainfall in the North and Northeast, agriculture production could be severely impacted including sugar cane, soybeans and cotton.”


The August forecast is out and the consensus is HOT!  The Midwest, particularly the Eastern Corn Belt should prepare for the 2nd hottest August of the 2000’s and of all-time according to Commodity Weather Group.  The developing La Niña system is believed to be responsible for this extreme summer heat.

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