Grain markets this morning are almost all in the green as crop progress and development remains top of mind for the complex
“At pivotal moments throughout history, there have always been grey areas, and there likely will be in the future. Courage now lies not in the black and white, as in the past, but in the grey.” – Safak Pavey (former Turkish politician)
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July 19 – Crop Progress Facing Pivotal Next Few Weeks
Grain markets this morning are almost all in the green as crop progress and development remains top of mind for the complex. The delayed start to Plant 2019 and subsequent weather has made this growing season in North America anything but normal.
On the trade front, it appears that the U.S. and China had stopped their trade war negotiations as they continue to be at an impasse over how to deal with Huawei.  Since the Presidents Trump and Xi met in Japan at the G20 a few weeks ago, there have been no face-to-face meetings and nothing is on the calendar since Washington continues to view the Chinese telecom giant as a national security threat. While phone calls between the two sides are taking place, it sounds like China is waiting to see what Washington does in its policy towards Huawei before moving the trade war talks forward.
With the two largest economies still playing tit-for-tat on trade, there continues to be major concerns over economic growth and just global trade in general. Despite the concern, ocean freight costs are starting to climb, and the impact has been felt by soybean prices in Brazil.  For example, freight rates from the southern port of Santos to Northern Chinese ports have climbed more than 20% in the past two weeks. It’s worth mentioning though that there’s a lot of soybeans booked to ship out of Brazil through September and the ag giants have poured billions of dollars into Brazilian ports, especially in northern areas that the Amazon River provides access to. 
U.S. Crop Progress Remains Behind
Crop progress reports from across North America continue to suggest this year’s crop is tracking well behind their long-term averages. Specific to the U.S., the latest quantitative and qualitative data confirm this. For example, I spent a few days earlier this week touring around Illinois, talking with farmers and grain buyers alike, and there are certainly production concerns on the minds of many. Just some highway checks show crop progress is behind in their development. Potentially exacerbating things is that more heat and humidity is on the way for the Midwest through the weekend, with areas east of Corn Belt receiving similar sweltering weather. 
In terms of the quantitative data, crop ratings for U.S. corn and soybeans haven’t been this weak since the drought of 2012.  The latest U.S. crop progress report puts the 58% of the country’s corn crop in good-to-excellent (G/E) condition, 13 points behind the five-year average.  For soybeans, 54% of the crop is rated G/E, 14 points behind the seasonal average. Digging in, the American Farm Bureau notes that there are 14 million acres of corn and soybeans in some of the largest producing states (MN, MO, IA, IL, IN, and OH) considered to be in poor or very poor condition, including more than 11 million acres of corn!
Digging into some of the other metrics in the crop progress report, it’s clear that development is behind. Corn silking across the U.S. is at 17%, well behind the 42% we usually see by now. Further, just 22% of U.S. soybeans are blooming, more than half of the five-year average of 49%. From a quality standpoint though, U.S. cereal crops are being ranked by the USDA pretty high.
For the cereals, 57% of the U.S. winter wheat crop has been harvested, up 10 points for the week but still 14 points behind the 5-year average. 78% and 75% of the spring wheat and barley crops in the U.S. have headed out, but that’s behind their averages of 87% and 89%, respectivelym for this week in July.
What About Crop Progress Elsewhere?
While the heat is hitting the eastern half of North America through this weekend, the forecast is expected to change with Western Canada starting to get some warmer temperatures as early as next week.  Those looking to work on their tans in the Canadian Prairies will rejoice, but there’s some conflicting sentiment in the crop progress reports as to how the heat will be received.
This is true for oilseed crops, especially canola, as Saskatchewan’s crop progress report this week suggested that just 42% of the crop is rated G/E.  We’ll get Alberta’s updated crop progress report later today, but two weeks ago, its canola crop had a G/E rating of 71%. While rains over the past few weeks have certainly helped bring the growing season precipitation accumulation back up to more normal levels, Agri-Canada says it’s still pretty dry in southern Alberta and many parts of Manitoba.
If we look outside of North America, it’s worth nothing that moisture for pulses in India isn’t looking all that great.  Across the entire country, rainfall remains 14% behind the normal that they have by this time of their rainy season. However, the deficit has reached as high as a 58% shortfall in Delhi. Specific to the top 5 states that produce pulses, there is a strong regional divide as rains have been spotty.  Madhya Pradesh has benefited with 25% above-average rainfall; western Rajasthan is 28% short but the eastern part of the state is 52% above-average; Uttar Pradesh is 13% short with the western areas 26% short; Maharashtra is 13% above average; and the state of Karnataka ranges from 23% short on the coast to 15% short in the southern interior to 4% above average in the northern interior. While it’s expected that India will produce about 23 MMT of pulses this year, this will wholly depend on these needed rains.
Overall, the next few weeks of crop progress reports will be watched closely by grain markets, both in North America and abroad. Volatile weather will continue to create volatility in said grain markets but it’s all to just get us to the August WASDE report on Monday, August 12th. In that report, not only the is the USDA going to give us re-surveyed seeded acreage data from the inaccurate June report, but also satellite and FSA certified acreage data. For FSA numbers, these usually don’t get shared until October.  On the outset, one could posit that the USDA is trying to overcompensate for the lack of good data in their July WASDE report!
Have a great weekend!
At 6:25 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3033 CAD, $1 CAD = $0.7673 USD)
Sept Corn: +1¢ (+0.25%) to $4.255 USD or $5.545 CAD
Sept Soybeans: +5.3¢ (+0.6%) to $8.923 USD or $11.628 CAD
Sept Soybean Meal (per short ton): +$1.40 (+0.45%) to $309.80 USD or $403.75 CAD
Sept Soybean Oil (cents per lbs): +0.09¢ (+0.3%) to 27.83¢ USD or 36.27¢ CAD
Sept Oats: -5.3¢ (-1.9%) to $2.695 USD or $3.512 CAD
Sept Wheat (Chicago): +3¢ (+0.6%) to $4.965 USD or $6.471 CAD
Sept Wheat (Kansas City): +3¢ (+0.7%) to $4.358 USD or $5.679 CAD
Sept Wheat (Minneapolis): +0.8¢ (+0.15%) to $5.263 USD or $6.858 CAD
Nov Canola: +2.5¢ (+0.25%) to $10.126/bu / $446.50/MT CAD or $7.77/bu / $342.60/MT USD
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