Sept 16 – September WASDE Report Belief & Oil Prices

Grain markets this morning are mostly green but disregarding most of the September WASDE report data shared last Thursday for another commodity: oil.

“If you believe in yourself and have dedication and pride – and never quit, you’ll be a winner. The price of victory is high but so are the rewards.”  – Bear Bryant (former Alabama football coach)

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September WASDE Belief & Oil Prices

Grain markets this morning are mixed but disregarding most of the September WASDE report data shared last Thursday for another commodity: oil. Soyoil and canola prices are both tracking higher accordingly this morning. This follows a mostly positive end to last week, which included some bullish data points in the September WASDE, albeit it’s not enough for some market participants (more on this in a bit).

Futures front-month grain prices weekly performance through September 13, 2019

Excess rain in parts of Nebraska and South Dakota has produced some flooding but good weather across the Corn Belt will keep pressure on grain prices this week. Currently, the bears are looking for anything to get late-planted crops to maturity faster. That said, fund managers added to their short positions in both corn and soybean prices last week to now sit at nearly 143,500 and more than 90,000 lots respectively.

Oil Prices and Oilseeds

Over the weekend, drone attacks on Saudi Arabian facilities knocked about 50% of the country’s oil output offline. This 50% represents more than 5% of ALL global oil production. [1] Not surprisingly, oil prices have traded way higher this morning. While many pundits are putting the blame on Iran, there are a few main takeaways here. The first is that this is a new level of warfare not seen and the second is that the first point intensely accelerates the instability in the region.

All of this culminates in oil prices climbing, trading basically limit up today (albeit, the day is just getting started!) There are some analysts who believe that WTI crude prices could trade above $75 USD/barrel if the outage in Saudi Arabia lasts through the end of August. That said, President Trump has authorized the release of American oil reserves if needed to help mitigate the disruption of energy flows and climbing oil prices. [2] Further, in a tweet, President Trump said that “we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” [3]

Switching gears, later this morning, we’ll get the August soybean crush report from NOPA and most analysts are expecting it to be a big number. Ahead of today’s report at 11AM CST, average analysts estimates peg NOPA’s crush volumes at a little over 162 million bushels (or 4.409 MMT if converting bushels into metric tonnes). If realized, this would be down nearly 4% from July’s NOPA crush of 168.093 million bushels (which was the sixth-largest ever for any month), but it would be a new record for the month of August, topping the current record set last year at 158.885 million bushels. As a reminder, NOPA’s members represent about 95% of all soybean processing in the United States.

On the other side of the border, Canadian canola exports are continuing their strong start to the 2019/20 marketing year. Through Week 5, more than 867,000 MT of Canadian canola has shipped out, nearly 50% more than the same point a year ago. As mentioned in last Friday’s FarmLead Breakfast Brief, there might be some further bullish upside for canola prices as Harvest 2019 remains behind its normal pass for the Canadian Prairies.

2019/20 Canadian canola exports through week 5

Western Canada Harvest 2019 progress through September 10

Doubting the September WASDE Report

After last Thursday’s September WASDE report, we saw a few more private estimates come out on U.S. corn and soybean yields. This includes Gro Intelligence, who is currently estimating average American corn yields at 170.7 bushels per acre (bpa) and soybean yields at 46.8 bpa as of Friday, September 13th. [4] On the other end of the spectrum is Indigo Ag, who, last week, pegged average U.S. corn yields at 159.4 bpa and soybeans at 45.2 bpa. [5] Specific to corn, Indigo was even more bullish back in August when their estimate for corn yields was closer to 155 bpa.

For perspective, the USDA’s yield estimates of 168.2 and 47.9 bpa, respectively, were based on growing conditions as of September 1st. Giving the benefit of the doubt, Gro Intelligence’s data-model estimates on that date were 167.6 bpa for corn yields and 44.7 bpa for soybean yields. However, as DTN editor Katie Micik Dehlinger noted, “Gro’s model doesn’t directly account for test weight, instead, relying on vegetative health readings to indicate if the plant has the potential to continue adding yield.” [6]

September WASDE soybean and corn yields comparables

Should a frost event take place before a corn cob is mature, the test weight becomes a major question mark. Purdue University Extension corn agronomist Bob Nielsen noted in an interview with DTN that a light frost could drop yield potential by 35% if the cob is still in soft dough stage and 27% if it’s in dent stage. [7] However, the crop will keep growing a bit. Conversely, a true frost (multiple hours below 28 degrees Fahrenheit) is a corn crop killer and would put yield loss at 55% for those cobs in dough stage and 41% and full-dent.

When soybeans get an early frost, the plant stops growing and the seeds start to dry down, meaning smaller soybean seeds, and thus, yields loss of up to 20 bushels per acre. Mother Nature could seriously help grain prices, and, currently, there are many farmers who are publicly vowing to hoard their grain until grain prices rise. But that’s mostly because of why grain prices are low, namely that they don’t trust the data in the September WASDE report (among other things). [8]

As I’ve mentioned many times already this month, I shouldn’t be focused on selling any grain right not, but just filling forward contracts that I locked in months ago. Very concretely, I stated after the June WASDE report that cereal and corn prices had a little more room to run but further gains in soybean and canola prices would be limited due to the trade disputes. Bottom line: unless you’re really short on cash or there’s a ridiculous special, you shouldn’t be selling at the harvest lows, whether you believe the September WASDE data or not.

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

At 7:45 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3245 
CAD, $1 CAD = $0.755 USD)

Dec Corn: +0.5¢ (+0.15%) to $3.693 USD or $4.891 CAD
Nov Soybeans: -2.5¢ (-0.3%) to $8.963 USD or $11.871 CAD
Dec Soybean Meal (per short ton): -$1.50 (-0.5%) to $300 USD or $397.35 CAD
Dec Soybean Oil (cents per lbs): +0.30¢ (+1%) to 29.73¢ USD or 39.38¢ CAD  
Dec Oats: -1.3¢ (-0.45%) to $2.793 USD or $3.699 CAD
Dec Wheat (Chicago): +0.5¢ (+0.1%) to $4.84 USD or $6.411 CAD
Dec Wheat (Kansas City): +1¢ (+0.25%) to $4.008 USD or $5.308 CAD 

Dec Wheat (Minneapolis): +1¢ (+0.1%) to $5.06 USD or $6.702 CAD
Nov Canola: +4.5¢ (+0.45%) to $10.247/bu / $451.80/MT CAD or $7.736/bu / $341.11/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.

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