Sept 24 – North American Crop Progress Stalled?

Good Morning!

Grain markets this morning are mixed, ahead of today’s USDA crop progress report, with wheat prices slightly in the green, but everything else in the red.

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”  – Thomas Edison (American Inventor)


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North American Crop Progress Stalled? 

Grain markets this morning are mixed, ahead of today’s USDA crop progress report, with wheat prices slightly in the green, but everything else in the red.  

Corn prices, alongside the rest of the complex, were able to rally on Friday for the second week in a row to end the week in the green. Intuitively, this is prompting the question, “Are we already off the harvest lows?” [1 

However, there is a lot of thinking out there that the U.S. soybean crop could get bigger yet. While soybean prices may be weighed on, as a result, what about corn prices?  

Next Direction for Corn Prices?  

Following bearish corn yields in the September 2018 WASDE and the two difficult weeks in the corn sector, all eyes will likely now focus on one demand factor: Ethanol. 

With corn prices falling and demand uncertainty rising, the question is how much slack ethanol can provide in the markets. On Wednesday, the EIA reported weekly production of 1.051 million barrels of the biofuel per day for the week ending September 14. 

That’s the worst production figure since April. And ethanol futures are taking a beating.  

Ethanol prices are off roughly 30% since their summer high, and oversupply remains a challenge. 

As profit margins continue to slide in the biofuel sector, we’ve seen a few ethanol plants announce plans to close down. That includes the Ergon facility in Vicksburg, Mississippi, and two Greens Plains facilities located in Superior and Lakota, Iowa. 

Ergon COO Kris Patrick said they were shutting down plants based on “continued erosion in margins, coupled with underperforming production equipment and the economic challenges of being a destination plant.” 

One positive element though is that late last week, the White House announced a policy change that while allowing year-round sales of gasoline with more ethanol. [2] Historically, E15 gasoline – which contains 15% ethanol – is blocked from being sold from June 1 to Sept 15 in areas where smog is a problem. Not anymore though.  

Some see the move from U.S. President Trump as a move that could bolster Midwest Republicans in tough mid-term elections as this would likely help appease corn farmers being battered by the trade war.  

The US vs. Brazilian Crop Progress 

Looking forward, as harvest/crop progress accelerates, we are looking at a bearish period for domestic corn. However, global competition remains robust right now, despite Europe’s cooked crop.  

In today’s crop progress report from the USDA, historically, we see 11% of the U.S. corn crop and 12% of soybean fields harvested by now.  

Sidenote: crop progress in Brazil as it relates to Plant 2018 for their soybean crop is picking up steam. According to AgRural, the nation’s second-largest soybean producing state – Parana — hit 11.2% of their soybean crop seeded this week.  

That’s the fastest pace ever recorded for the state as eager farmers get their seeds into the ground. 

Last year – at this point – just 1.7% of the crop had been planted. Some are speculating that harvest could begin in the region in January. That would be a month ahead of schedule. 

Comparably, Informa Economics is estimating that American farmers will drop their 2019 soybean acres to 82.3 million, while corn acres are expected to climb to just over 93 million. In 2018, 89.6 million acres of soybeans and 89.1 million acres of corn were planted across the U.S. 

Western Canada’s Crop Progress Snowed In 

Over the weekend, Western Canada was ablaze with the cold stuff. Snow fell on practically every imaginable acre, including a lot of those that haven’t been combined. Unfortunately, a lot of acres out there left to combine.  

Last week’s crop report from Saskatchewan showed that, from the prior week, only 4% of the spring wheat crop was combined, 6% of the canola crop was binned, and just 2% of both the province’s oats and barley was harvested. [3 

saskatchewan crop progress - harvest behind

Very concretely, Saskatchewan Agriculture says that a wet and cool week has stalled harvest operations. Many areas received over an inch of rain in the past week, and again, snow has now fallen almost everywhere there was crop still out in the field.  

Next door in Alberta, it’s no better, as per their provincial crop report on Friday. [4] Just 3% of the province’s spring wheat and barley crops were combined in the previous week, while the oats and peas harvest only moved up 2 points. Only 0.5% more canola got combined that the week prior.   

Across the Canadian Prairies, farmers have seen a pretty miserable September for harvest, and the memories of Harvest 2016 are omnipresent. We’re hoping that Mother Nature starts cooperating soon, but the market is trying to understand the quality and quantity ramifications of such negative weather conditions! 

If you’ve yet to proactively order your grain tests for your grain – especially your cereals – do so now. Buyers are getting highly suspicious of the quality coming in – be at the front of the line by knowing your grain as soon as it comes off. 

To growth,

Brennan Turner

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

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