Harvest nears completion, prices rise

ff_admin
Farm Forum

11/01/16 — As harvest nears completion for most fall crops, prices have actually risen for corn, soybeans, and wheat the past few weeks. Most surprising is this is occurring even while harvesting what is a record large yield in both corn and soybeans. In soybeans, this yield could be as high as 52 bu/acre (in the November report), and our previous record high yield was 48 bu/acre so this is nearly 10% larger than our previous record high yield! The fact that prices are rising might have more to say about demand than anything, or at least the perceived demand for soybeans.

Weather forecasts as of today, Nov. 1 have the next 7 days dry for the entire Corn Belt, with below normal precip for all states except Texas and Oklahoma. The 8-14 day forecast has rain in the eastern Corn Belt and eastern Lakes states, with some normal to above normal precip there, but dry everywhere else. Temps continue to be forecast at well above normal for the entire 14-day period (they cool seasonably but remain above normal for the period). Overall this is still a good forecast to finish up the harvest with. So in two weeks, we might have the harvest pretty much wrapped up across the U.S.

Crop progress reported Oct. 31 showed the corn harvest at 75% complete (equal to the average pace), with soybeans at 87% complete (2% ahead of the average pace). So the harvest of corn and soybeans has gone mostly as planned. Yields are holding up quite well, in fact the yields have probably gotten better as harvest moved north this year, as northern states had excellent yields of both corn and soybeans.

Cotton is 46% harvested vs. 48% normally, so we are a bit behind normal pace here. Sugarbeets are 86% harvested, just slightly behind the average pace of 87%. Sunflowers are 62% harvested, 5% ahead of the average pace of 57% complete at this time. Sorghum is 76% harvested, 8% ahead of the average pace of 68% complete. Basically, the harvest has gone quite well for almost all U.S. crops. Sure, there are some areas that are too wet and some areas that are too dry, but for the country as a whole, it has been a pretty non-eventful harvest season.

Planting is also taking place, and the new crop year is coming and starts with winter wheat. Winter wheat is 86% planted vs. 88% normally, so we are just slightly behind normal here. Winter wheat is 70% emerged, 1% ahead of normal 69%. Winter wheat conditions are rated 58% G/E, down 1% from last week but still well above last year’s 49% rating. We had a record large yield of winter wheat in 2016, too, but that wasn’t because of last fall’s conditions. It was the widespread spring rains and excellent spring and early summer weather that produced the record large winter wheat yields. So far in the 2017 growing season, though, the winter wheat is relatively highly rated.

With the recent market rally even with record large yields of corn and soybeans, we are considering locking in some storage hedges in this year’s crop of corn and soybeans. Either we’ve already bottomed the market in both corn and soybeans, or maybe there is one more push lower left in the market to take us back to the recent lows and form a double bottom. If we are going to form a double bottom, let’s target the old lows in corn at about $3.15 Dec. and $9.40-50 Jan. beans to remove current hedges, targets which are well below current prices.

Since prices of corn and soybeans have risen nicely into the late harvest, we are approaching some prices for storage hedges that would be favorable for locking in a return to storage. Using the carry in the market and expected basis improvement from the horrific levels basis is currently at, we could make some money storing corn and to a more limited extent, even soybeans (mostly for basis improvement). So lets target $3.90 July corn for a storage hedge on 10% of remaining corn, and $10.45 Jan. beans for a storage hedge on 10% of remaining 2016 soybeans. We will get started on these storage hedges, and see where the market takes us from here. Lets also target $10.15 Nov17 to price the first 10% of 2017 soybeans at these profitable levels, as current expectations are for a 3-4 million acre rise in soybeans acres in 2017. So that at least is a starting point for pricing 2017 crops.