Crop Conditions and Short and Long Term Weather Outlooks - Wednesday, 21 June 2017

Some relief was provided this weekend as rainfall of ½ to 1 inch fell across much of the Western Corn Belt including the Dakota’s, Minnesota and Iowa. This has assisted some crop ratings for corn and soybeans to hold steady or improve from the ratings of a week ago.  The USDA corn crop conditions report this week left the overall Good to Excellent rating unchanged from last week at 67% vs 75% one year ago. While the overall rating remained steady from one week ago, 11 states showed improvement, 3 states were unchanged and 4 states had conditions decline.

 

Demand for ethanol has not reached levels that were expected and economists are beginning to monitor the U.S. ethanol industry and ethanol reserves.  Generally by this point of the year fuel demand begins to peak which also reduces the demand for ethanol which is expected to only add to the already worrisome stock levels.  Unfortunately, there are valid concerns growing that we may begin to see a reduction in ethanol production and demand for corn.  There have been “rumors” circulating in our area about the possible shut-down of 2 area ethanol plants and a reduction of production at a 3rd area ethanol facility. 

The Funds have bought back, over the past 2 weeks, nearly 1 billion bushels of corn through Chicago Board of Trade futures and options contracts.  Last week alone was the 2nd largest round of short-covering ever seen in the corn market when 109,295 short positions were bought back, the record of 119,265 contracts was set in June, 2015.  Information provided by the Commodity Futures Trading Commission indicates that Funds were still net short as of June 13th but are now thought to be long as we began this week of June 19th.

The newest data from the USDA shows that slightly over +4 million acres of U.S. soybeans remain unplanted and close to 5.4 million of the planted soybean acres are rated in Poor to Very Poor condition.  Last week the USDA overall soybean rating of 66% Good to Excellent was raised this week to 67% vs 73% one year ago.  This week’s report showed an improvement in conditions from the previous week for 14 states and 4 states showed declining conditions.

 

The U.S. crush industry is facing an increasing number of competitors in the domestic and global markets from alternative protein feeds.  Much of this growing competition is coming from distiller grains as well as feed wheat and the results are causing inventories to grow and pushing crush margins below historical averages.

Ethanol producers in Brazil traditionally use sugar to produce the majority of their product.  Over the past few weeks sugar prices have fallen and there is some speculation that farmers in Brazil are considering switching their acres from sugar production to soybeans which is in addition to the 3% increase in soybean acres that were already expected.  So while this may add to the pressure from the global soybean market it may end up to be a boost for the U.S. ethanol industry.

Politico reported that last Thursday was the first day of Trump’s Task Force on Agriculture and Rural Prosperity.  The purpose of this task force is to review rules, programs and other governmental moves and decisions that affect rural America and then report back in October to the President with a plan on what needs to be done to bring economic vitality back to Rural America.  Sonny Perdue, the U.S. Secretary of Agriculture, is leading the group that consists of 23 various offices and agencies.  Some of the other governmental departments involved in this process include: Energy and Urban Development, Labor, Transportation and the Small Business Administration, Interior, Defense and Commerce. This task force is a large undertaking which would be made more effective and efficient with subcabinet members in place under the Ag Secretary.  Perdue has been frustrated with the slow pace of these subcabinet nominations and told Senate appropriators last Tuesday that he doesn’t expect “yet-to-be-named” team members to be named until after the August recess.  Perdue said, “That’s very troubling to me, I’m tired of working 22 hours a day.”

The upcoming 2 week forecast is indicating that we may be headed back to a wet weather pattern similar to what we saw in May.  The map below of the Midwest is a precipitation forecast map for Saturday, June 17th through Sunday, July 2nd, measurements are shown in inches.

Short-term forecasts are showing a cooler pattern developing over the countries mid-section which may hamper the “risk premium” that traditionally begins to diminish in late June to early July.  There are some forecasts that show a return to warmer temps as we move into July and corn pollination which may offer some strength back to the market.

NOAA’s outlook for the month of July as of June 15th

 

PLANTING PROGRESS

 

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