As the 2019 ProFarmer crop tour starts its annual trek this morning through corn and soybean fields in the Midwest, grain markets are starting the week out in the red.
“Honesty is the best policy; the only way out is deeper in: a candid confrontation with existence is dizzying, liberating.” – David Shields (American author)
Aug. 19 – ProFarmer Crop Tour Goes Head-to-Head with USDA
As the 2019 ProFarmer crop tour starts its annual trek this morning through corn and soybean fields in the Midwest, grain markets are starting the week out in the red. CFTC data shows that last week, money managers cut their net-long positions in corn futures to just 21,527 contracts, the weakest net-bullish position since the end of May. However, fund managers got a little more bullish on soybeans – thanks to the smaller acreage in last week’s WASDE report – as they reduced their net-short spot by nearly 9,000 positions to 62,203.
Before we dig into the crop tour though, this week, broader markets will be impacted by what’s going on in the state of financial markets. Last week, recession fears in the U.S. started to accelerate as we saw a yield curve inversion, which happens when the 10-year U.S. Treasury note’s yield falls below that of the 2-year rate.  To help combat some of these fears, the White House is calling for the U.S. Federal Reserve to cut interest rates again. We’ll find out this week how the Fed is thinking but we’ll also learn more at the annual Jackson Hole Economic Policy Conference, which takes place every August in Wyoming.
On the weather front, a heatwave is expected in the southern Midwest and Southern Plain states, with temperatures expected to get as high as 115 degrees Fahrenheit (or 46 degrees Celsius) in Arkansas! The eastern half of Oklahoma is also under an excessive heat warning, with the National Weather Service expecting “very dangerous” weather.  On the opposite end of the spectrum, areas in east-central Saskatchewan (including my hometown of Foam Lake, SK), were hit with a (disgusting) overnight frost this past Saturday. Across the Prairie province, record low temperatures were seen in many places. 
Will Crop Tour Be Bullish or Bearish?
Last week, grain markets got a bearish slap in the face from the USDA as the August WASDE completely dismantled all expectations of a reduction of corn acres and yields. On Thursday and Friday last week, grain markets tried to recover, albeit, as you can tell this morning, some off that rebound has been lost. It might all come down to this week’s annual ProFarmer crop tour to tell us what’s going on in American corn and soybean fields. Expectations are that the crop tour will yield 1400 field samples from both corn and soybean fields, and that should give a good idea of the yield potential. 
As a refresher, the crop tour is a 4-day event that runs from today through Thursday and has over 100 scouts who pull into fields every 15-20 miles along their pre-determined routes. Today, the crop tour runs mostly through Ohio and South Dakota with a bit of Indiana and Nebraska also on the planned routes. From there, the crop tour scouts have very specific instructions on how to select plants, how to measure pod or kernel count, and so on.  One interesting dynamic is that this year’s ProFarmer crop tour will include the head of the USDA’s NASS division, who will not only participate as a scout, but also speak to and answer questions at the evening suppers.  These would be interesting dinners to be a part of as I’m sure there are a few hard questions he’ll be asked to answer (namely acres!)
For some analysts, the one main piece of data that they’re looking for on this year’s crop tour is ear counts from corn.  Also, since the crop tour will travel through areas that actually saw a lot of Prevent Plant acres, the scouts have been instructed, to pass on those fields and only take samples from fields that have actually been planted. That said, if a bean plant has no pods on it yet (because it’s not yet filling pods or otherwise), the scouts are instructed to count that as a zero. The key point here though is that it will be counted. Even if the data is immature, it’ll be the most up-to-date information we have on the crop, especially considering the USDA’s data for the August WASDE was a few weeks old by the time it was published last Monday.
You can follow the scouts and all activity of the crop tour via Twitter by just clicking on this #pftour19 hashtag.
Soybean Exports in Question
Soybeans are taking a bit of a bath this morning as fresh insights from China show that the country is relying on South American soybeans more and more. The feeling is reciprocal, at least by Brazil as they expect more soybeans to be shipped to China in the years to come.  In fact, one analyst from Chinese-government-backed think tank says that the People’s Republic shouldn’t have to rely on the U.S. for soybeans in the 4th quarter of the calendar year.  As I mentioned two weeks ago though, despite the trade war going on, I, and many others find this possibility of absolutely no U.S. soybean purchases quite unlikely.
Of course, this might change if the African Swine Fever continues to spread as it has and Chinese soybean needs continue to fall. As a reminder though, ASF is spreading and is now in Europe.  Separately, Ukraine has basically replaced the U.S. as the principal supplier of corn to China. 
All this in mind, with 3 weeks to go in the corn and soybean 2018/19 crop year, 2019/20 is starting on a sobering export note. Through week 49, U.S. corn exports are tracking a little more than 11% behind last year with 47.4 MMT sailed while soybean exports are 20% behind last year’s pace with 43.01 MMT shipped out. As I mentioned at the end of July, it’s tough to see significant upside to soybean exports in the near future (except for the beginning of a new crop year, perhaps).
At 8:10 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.327 CAD, $1 CAD = $0.7536 USD)
Dec Corn: -6.8¢ (-1.75%) to $3.74 USD or $4.963 CAD
Nov Soybeans: -8.3¢ (-0.95%) to $8.715 USD or $11.564 CAD
Oct Soybean Meal (per short ton): -$2.40 (-0.8%) to $294.40 USD or $390.66 CAD
Oct Soybean Oil (cents per lbs): -0.19¢ (-0.65%) to 29.06¢ USD or 38.56¢ CAD
Dec Oats: +1¢ (+0.35%) to $2.753 USD or $3.652 CAD
Dec Wheat (Chicago): -3.8¢ (-0.8%) to $4.738 USD or $6.286 CAD
Dec Wheat (Kansas City): -4.8¢ (-1.15%) to $4.048 USD or $5.371 CAD
Dec Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.178 USD or $6.87 CAD
Nov Canola: -3.6¢ (-0.35%) to $10.224/bu / $450.80/MT CAD or $7.705/bu / $339.72/MT USD
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