Market Analyst: The bull rages onward

Ray Grabanski
Special to the Farm Forum

We are back to challenging the high prices of all three grains again, including wheat, corn and soybeans. According to the Chicago Board of Trade, December wheat is at a new four year high today, with soybeans just below this year’s high (which is the highest price in years). Corn is challenging its yearly high as well, as its still above four dollars. There is no question that the bull is still raging in the grain market.

A lot of that has to do with the weather, including a slow start to planting in South America and a drought to wrap up 2020 in the United States (which poses a major threat to the 2021 crop). Weather forecasts call for cold and dry weather in the U.S., but first the northern corn belt will see normal precipitation and snow. A snowstorm ran through North Dakota and South Dakota earlier this week and moved into Minnesota, making the last of harvest more difficult.

Slow planting in the north of Brazil means less double crop corn production — which is a big deal in Matto Grasso. U.S. corn harvest is 60% complete (17% ahead of normal), with crop ratings unchanged this week with 61% in the good to excellent (G/E) range (vs. 56% last year).

Soybeans are 75% harvested (17% ahead of normal), with no ratings as over 50% was harvested last week. Both corn and soybean yield models will finish the year limping in at only about ‘trend’ yields, in contrast to all the great expectations of a bumper crop in 2020. So far, harvest yields are disappointing in many areas, but more in the southern US than in the North due to temperatures above three to eight degrees of the normal temperatures (which is yield robbing) for much of July and August.

ProAg says that the United States Department of Agriculture’s soybean yield estimates are 2-2.5 bushels/acre too high, and corn yields 3-6 bushels/acre too high. Exports of both corn and soybeans are also projected too low by the USDA, so much tighter ending stocks will occur than currently forecast (soybean stocks could be cut in half by spring). Prices will likely continue to march higher, in spite of all the “short and wrong” marketers calling for a top to occur soon.

Other crop progress shows cotton harvest at 34% (equal to normal), with cotton ratings unchanged at 40% G/E (vs. 41% last year). Sorghum is 63% harvested (12% ahead), sugar beets 83% harvested (vs. 62% average), and sunflowers 37% harvested (vs. 22% normal).

Winter wheat is 77% planted (vs. 72% normal), but germination is going to be a problem due to dry soils. Emergence is 51% (vs. 48% normally), but it’s going to be spotty at best.

Pasture conditions continue to decline, down 2% this week to only 20% rated G/E (vs. 43% last year): cattle will need to come off pasture early and be fed corn or other feed grains to keep them alive as the western drought has devastated pastures. Top soil moisture nationwide is 44% adequate/surplus (down 3%) vs. 76% last year; subsoil is 47% adequate/surplus (down 3%) vs. 75% last year. There is no question that drought is a great threat to the 2021 crop, and already is adversely affecting winter wheat germination.

We have the best chance of a 1980 or 1988 type drought year in 2021 than we’ve had in decades. Of course, God above controls that, but us mere men should - at least - make note of what has developed so far.