Aug 22 – Bearish Crop Tour Weighs on Grain Prices

Good Morning!

Bearish crop tour numbers and debatable Russian wheat rumors are keeping grain markets in the red this morning. 

“People don’t have a good intuitive sense of how to weigh new information in light of what they already know. They tend to overrate it.” – Nate Silver (American Author)

Bearish Crop Tour Weighs on Grain Prices 

Grain markets are all in the red this morning as the complex digests Russian wheat rumors and this year’s bearish ProFarmer crop tour numbers.  

In yesterday’s Breakfast Brief, we reviewed how the ProFarmer crop tour was offset by some slightly bullish crop progress datapoints. However, there’s no such catalyst to keep corn prices, and soybean prices elevated today (and in yesterday’s trading session). More explicitly, the USDA’s record corn yield estimate of 178.4 bushels per acre (BPA) might not be such a pipedream. [1] 

Wheat prices have seemingly lost their uptrend that started in mid-to-late July, albeit we know that global wheat stocks will not be a record. There are some ideas that Russian wheat quality and quantity issues are overblown, which is supporting the retreat of wheat prices. However, the amount of wheat still held by major wheat exporters at the end of the 2018/19 crop year is expected to be at their lowest levels since 2007/08. [2]   

That being said, it’s unlikely wheat prices will see 2008-like values, since major importers (i.e., North Africa) are in a better position this year, thanks to some decent harvests of their own.  

Canada will be one of those countries with slightly fewer wheat supplies. Back in their July report, the AAFC lowered were wheat (excluding durum) 2018/19 carryout by 700,000 metric tonnes to 4 MMT. For some, this a significant level as people start to get bullish if Canadian ending stocks fall below that number.  

However, what’s more, noticeable in this month’s report is that AgCanada raised its forecast for wheat prices. 

2018-08-21-crop-tour-canadian-wheat-ending-stocks

 

For our GrainCents subscribers, we’ll be providing more in-depth coverage of the AAFC reports in the Weekly Digest. This report will be especially important if you’re in the business of buying or selling durum, barley, lentils, and peas. 

Click here to subscribe and start your free 3-week GrainCents trial and get this week’s important analysis.  

Questioning Nebraska Crop Tour Results 

On Day 2 of the 2018 ProFarmer Crop Tour, scouts toured through the rest of Nebraska and Indiana, as well as part of Illinois.  For the Hoosier and Corhusker states though, the crop tour showed some impressive results. [3] 

In Nebraska, average corn yields were seen at 179.2 BPA. That’s nearly 10% better than the 3-year average of 163.1 BPA and about 8.5% more than last year’s 165.4 BPA found on this stretch of the crop tour! The range of yields was from 79 BPA on dryland fields to 250 BPA on irrigated land. [4] 

Currently, the USDA is forecasting an average corn yield in Nebraska of 196 BPA up nearly 8.5% over last year’s yield. Karen Braun of Reuters points out that, since 2001, on average, Nebraska’s corn yield has consistently been 15.5 bushels below the USDA’s final number. [5].  

This is because the ProFarmer Crop Tour has historically toured through an equal percentage of dryland and irrigated corn, despite, the fact more Nebraska corn fields are irrigated versus dryland. Last year, the USDA said that 65% of Nebraska’s cornfields are irrigated. 

On this year’s crop tour in Nebraska though, 43% of the corn fields sampled were irrigated versus 50% in 2017.  

Soybean pod counts on the Nebraska crop tour also impressed, averaging nearly 1,300 in a 3’x3’ area. This is 9% better than the 3-year average and 15% better than last year’s count. 

Indiana Crop Tour Shows Double-Digit Gains 

In the east, Indiana’s average corn yields on the crop tour were pegged at 182.3 bushels per acre. That’s 6.5% above last year’s yields and 12% more than the 3-year average of 162.5 BPA. It’s possible that the final number could be even bigger, as the crop tour has a history of understating the Indiana corn crop by 2.3 BPA.  

For soybeans pod counts, Indiana numbers in a 9-square-foot section was 1,312. This is also a significant 14% better than the 3-year average of 1147 pods, and 12% better than 2017’s count.  

Part of yesterday’s crop tour in the east went through Illinois, which showed also showed some impressive early numbers. However, the soybean crop is less developed in Illinois than Indiana, and corn yields in the state varied by more than 115 BPA [6].  

Today’s leg of the ProFarmer crop tour will finish up Illinois and then tour through eastern Iowa. The western leg of the crop tour will be exclusively focused today on the west half of Iowa.

To growth,

Brennan Turner

President | CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead or @GrainCents on Twitter

At 7:20 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3024 
CAD, $1 CAD = $0.7678 USD)

Dec Corn: -2.5¢ (-0.67%) to $3.720 USD or $4.845 CAD
Nov Soybeans: -3.8¢ (-0.43%) to $8.823 USD or $11.491 CAD
Oct Soybean Meal (per short ton): -$0.60 (-0.18%) to $325.10 USD or $423.41 CAD
Oct Soybean Oil (cents per lbs): -0.10¢ (-0.03%) at 28.71¢ USD or 37.39¢ CAD  
Dec Oats: -1.0¢ (-0.35%) to $2.860 USD or $3.725 CAD
Dec Wheat (Chicago): -5.0¢ (-0.91%) to $5.428 USD or $7.069 CAD
Dec Wheat (Kansas City): -6.5¢ (-1.16%) to $5.558 USD or $7.239 CAD
Dec Wheat (Minneapolis): -2.8¢ (-0.46%) to $6.035 USD or $7.860 CAD
Nov Canola: -$1.90 (-0.37%) to $11.467/bu / $505.60/MT CAD or $8.804/bu / $388.21/MT USD

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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