Report Update and Possible Harvest Delays In Store - Monday, 03 October 2016

Results from Friday’s USDA’s Quarterly Stocks report:

USDA's September 30, 2016 Quarterly Stocks

Quarterly U.S. Grain Stocks

 

Sep #

Avg. Trade Est.

Trade Range

Sept. 2015

June 2016

Corn

1.738

1.754

1.665 - 1.862

1.731

4.722

Soybeans

0.197

0.201

0.180 - 0.256

0.191

0.870

Wheat

2.527

2.397

2.115 - 2.558

2.097

0.981

The numbers for corn can be looked at as “uneventful” or as slightly bullish since the September number was slightly lower than what the trade had been anticipating according to Kevin Van Trump.  He cautions producers, “The chart gurus are still forecasting stiff resistance up in the $3.45 to $3.55 range.  With major downside support remaining in the $3.00 to $3.20 range.”  There is now concern that China may begin increasing corn exports which would add some anxiety to the market and South America is being watched closely as planting continues in several areas.  Some regions in southern Brazil and Argentina have heavy rainfall forecasted for this week, this precipitation is considered beneficial for early crop growth and soil moisture due to the severe drought conditions earlier this year.  The eastern half of Mato Grosso still remains dry and conditions there will continue to monitored. There are some traders speculating that corn acres in S.A. may be considerably larger than earlier thought; in addition they are anticipating that the USDA may raise the acreage estimate for corn acres here in the U.S. for 2017.

 

The soybean market received some positive news in last week’s report when the USDA lowered last years estimated bushels harvested by -2.82 million bushels.  This adjustment was made by lowering the total harvested acres by -82,000 acres and leaving the final average yield unchanged at 48 bushels per acre. While this is somewhat positive news Van Trump reminds us, “We have the trade starting to focus more attention on next week’s monthly USDA Supply and Demand report, where most insiders suspect both the yield and acreage estimates are going to work themselves higher. We have to keep in mind many bears are talking more seriously about domestic new-crop ending stocks eventually pushing themselves north of 400 or perhaps even 450 million bushels.”

Today marks the beginning of the Fall Harvest Discovery Period for Revenue Protection insurance policies.  These policies are based on the average CBOT futures prices for the December futures price and November’s futures price during the month of October.  The established Spring Base Prices for 2016 for corn was $3.86 per bushel and $8.85 per bushel for soybeans. 

Harvest progress may be interrupted mid-week in the Midwest.  The five-day precipitation map for yesterday, October 2nd-Friday, October 7th is shown below.

So what happened to La Niña?  According to information from CNBC, NOAA has called off their La Niña watch, explaining that it is unlikely that La Niña will form this fall or winter and that conditions at this time are moving in a more neutral direction.  Brian Kahn of Climate Central argues that the existence of La Niña really depends on who you ask.  The Japan Meteorological Agency says that La Niña has arrived, and the Australian Bureau of Meteorology has left their watch in place and is still waiting for the official arrival. Kahn explained, “From what I understand all 3 agencies are looking at the same ocean, but have come to different conclusions about when—or even if—La Niña will happen.  I suspect this comes down to how you specifically define La Niña.”

NOAA- In order to officially declare the formation of La Niña this agency needs to see ocean temps in a precise region of the tropical Pacific fall below normal levels for five consecutive 3-month periods in a row.

Australian Bureau-Has even tougher guidelines which say that the temps in the specific area of the tropical Pacific need to remain 1.55 degrees F below normal but don’t have a certain period of time this must be maintained.

Japan’s agency-Watches and monitors a different region of the Pacific, temps in this area have been cool enough to announce the formation of a La Niña and they have done so.

IF there truly is no formation of La Niña the U.S. will likely see warmer than normal weather for the next 3 months.  Also, the absence of La Niña will allow for higher chances of “more random and unpredictable weather events…”  

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