Interest Rates and Harvest Progress - Friday, 23 September 2016

Many producers are finding now that harvest has begun that yields are not what they had expected.  Keven Van Trump of the Van Trump Report has been receiving information from many of his customers that have been finding extremely disappointing yields once they began harvest. Van Trump reports, “I’m not saying it’s everybody, but there seems to be an abnormally large group of producers this year who have been forecasting and expecting fantastic yields, but are coming up extremely short-handed once they start harvesting the bushels out of the field.  Let’s just say there’s some things happening out in the fields that guys haven’t seen before and are leaving many scratching their head.  The planting was good, the moisture was good, the crop looked good, but the bushels simply weren’t out in the field.”  One of his readers in Northwest Ohio sent in the picture shown below with a brief message which Van Trump shared in his report.  The farmer stated that the corn shown is a 110 day planted on April 20th.  The weather was cool for a week following planting and later was followed with hot dry conditions with only 2.1 inches of rain during June and July.  Following an actual yield check the producers is expecting a final average of close to 160 on a farm with an APH of 201.

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The USDA is estimating that the 2016 corn harvest is 9% complete which is slightly below the 5 year average of 12% with most major corn producing states running behind their average pace.  With the excessive rainfall this week in a large portion of northcentral and eastern Iowa and south central and eastern Minnesota the harvest pace is likely to fall even further behind normal for quite some time.

 

Soybeans are facing record setting yields this growing season which could push ending stocks above 400 million bushels and in the process move prices back toward previous lows.  On the other side of the soybean story though is the potential for weather problems here in the U.S. as well as in South America.  The heavy rain in key U.S. production areas has delayed the harvest of soybeans as well as corn and in South America concerns are building over the potential of “neutral” vs La Niña weather pattern.  In past years neutral weather patterns have proven to somewhat problematic for producers in Brazil as well as Argentina.

The USDA estimated soybean harvest progress for this past Monday is mapped below:

               

 

For several years borrowers have enjoyed the benefits of low interest rates that were lowered several years ago in an attempt to stimulate economic growth. The chart below shows the “Federal Dot Plot” which is a tool used to help predict the future movement of interest rates.  There are 16 members of the FOMC which is the rate-setting body within the Fed and each member is represented by a dot on the chart.  The dot for each representative is placed according to that members view on where they feel the federal funds rate should be for nearby as well as several years from now.  It appears from the data shown on this chart that members seem a bit more “dovish” now following the September meeting than they did after the June meeting.  This would indicate that the FOMC members are more likely to keep the interest rates lower for a longer period of time than previously thought.

 

The Corn Belt has had widely differing weather this week, flash flooding across northern areas is contrasted by very warm and dry conditions across the south.  Looking ahead an “energetic storm system” is expected to emerge from the west generating a “multi-day heavy precipitation event”.  Rainfall amounts of 2 to 6 inches are expected from the Intermountain West to the northern High Plains with a cool air mass to follow.  The eastern U.S. should remain warm and dry except for cool temps in the Northeast. 

The map below shows the 48 hour rainfall totals for September 20-21st for the upper Midwest.  There are large pockets where rainfall totals have reached 12+.  Flash flooding is widespread with evacuations of some communities along swollen rivers taking place, river’s are expected to crest at or near record levels but there is more rain in the forecast for the weekend.

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