Market analyst: Prices slide, soys more friendly

Ray Grabanski
Special to the Farm Forum

08/20/19 — The market seems fairly comfortable sliding lower for the time, with the USDA not helping things last Monday by not cutting acreage as much as expected in corn. However, they did cut soybean acreage much more than expected, and net we actually planted fewer acres than the trade was looking for. It’s just that it shifted from soybeans (with quite large stocks) to corn, which was the bullish commodity this summer. Essentially, when you try to reconcile all the numbers it looks like about 5 million acres of soybeans shifted to corn acreage from April 1 to the end of planting.

Another difficult thing to reconcile is the 19.1 million acres FSA already reported as prevented planting (11 million corn), and the 90 million acre planted acreage figure for corn. Something’s not right! For one, we started with 93 million acres in March. If you subtract 11 from there you get 82 million, not 90 million. But I suspect that from the original 93 million, we gained 5 million from the soybean acreage up to 98 million, then we can subtract 11 million for a net 87 million and that seems close. USDA might very well be 3 million acres high yet in corn, and perhaps 2-3 million high in soybeans as well. But they are close, and getting closer each time they revise acres (they cut 5 million in the August report; I think they are likely to subtract another 5 million in October).

Weather is still fairly benign at mostly normal precip and normal temps, but the forecast for the 8-14 day forecast has continued to run cooler and cooler the past 3-4 days such that now we are forecast to be well below normal to start September. That will likely bring the first frost threats to the northern Corn Belt, and with it the threat of some significant yield losses for much of the late planted crop. The greatest share of that crop is in Illinois, Indiana, Ohio, Michigan, and Wisconsin where frost threats are going to be quite threatening to the eventual yield of the crop. Specifically, the next 7 days are forecast to have mostly above normal precip in the southern half of the U.S., and below normal in the northern half. The precip forecast will be similar for the 8-14 day forecast now, but the temp forecast turns to about normal temps the next 7 days, and then temps turn to below normal for the 8-14 day forecast — with some chilly nights in the in the north. That will likely bring the first frost forecast in Canada, and the northern U.S. may not be far behind if that pattern persists. Also the cool temps will rob the north of growing degree days, which it so desperately needs to reach maturity before fall’s first frost.

There is little news in the U.S. today that matters much to farmers, just the typical squabbling which goes on politically. Crop conditions came out yesterday, with continued declines in corn and soybeans of 1% in the good/excellent ratings. Corn dropped 1% to 56% rated G/E, with soybeans down 1% to 54% G/E rating. The Pro Ag soybean yield model dropped further to 47.5 bu/acre, down .155 bu/acre and now a full 1 bu/acre below USDA’s projected 48.5 bu yield. That will drop carryout another 75 mb when realized, and it is continuing to drop. Corn, however, had a 0.3 bu/acre RISE in yield potential to 172.5 bu/acre, now 3 bu/acre above USDA’s 169.5 bu. Corn might very well be better than people will expect, and in fact only about 4 bu/acre below last year! Hard to imagine with all our problems planting that corn yield potential could be that good! Both crops are well behind normal development, with soys blooming at 90% (6% behind normal), and podding at 68% (17% behind normal). Corn is 95% silking (4% behind), 55% dough (21% behind), and 15% dented (15% behind).

Sorghum crops are also behind normal, with 75% heading (8% behind), 31% coloring (12% behind), and 21% mature (5% behind). Winter wheat is 93% harvested (5% behind), barley 31% harvested (28% behind), and HRS wheat 16% harvested (33% behind). So the harvest will be slow for all crops as the planting was slow as well; it will be a long fall for most farmers.

Perhaps the most important fundamental still left to be answered on the supply side is the frost date. If temps cool as forecast into early September, anyone who gets a freeze in September is going to have a huge loss on their hands — and a disaster crop. That might affect corn and soybeans almost equally bad in reducing total production as both are well behind normal development. Cool temps in early Sept. might also be devastating in that we lose GDD that are precious at this point in time. We need a long, frost-free fall to get this crop to maturity, and the worst states are probably Missouri, South Dakota, Indiana, Ohio, and Illinois where planting was all quite late (mostly June). It really wasn’t a hot summer, but it really wasn’t necessarily cool, either. But normal temps when planting 2-3 weeks late is just not enough time for most corn and soybean crops.