Grain markets are in the red as the complex weighs the corn and soybean yields results from the ProFarmer crop tour this week.
“Those who cannot understand how to put their thoughts on ice should not enter into the heat of debate.” – Friedrich Nietzsche (German philosopher)
Corn, Soybean Yields Continue to be Up for Debate
Grain markets are in the red as the complex weighs the corn and soybean yields results from the ProFarmer crop tour this week. I mentioned in Wednesday’s FarmLead Breakfast Brief that both corn yields and soybean yields on this year crop tour were seemingly a function the late planting campaign and smaller plant populations.
Before digging further into American corn and soybean yields, U.S. President Trump continues to face criticism for his decision to provide more oil refineries with ethanol waivers, allowing them to not have to blend the biofuel into gasoline.  For perspective, President Obama’s administration approved 8 ethanol waivers in 2013, 2014 and 7 in 2015; in 2017, the President Trump White House / EPA approved 35 waivers and for 2018, it was 31. The larger ethanol waiver program puts negative pressure on corn prices as ethanol demand is intuitively weaker with fewer refineries having to blend the biofuel in.
Accordingly, the White House is now scratching its head as it tries to alleviate the farmer angst towards the one-two punch they’ve been dealt by the Trump administration: the U.S.-China trade war and more ethanol waivers.  At least one POET ethanol facility in Indiana is shutting down for the foreseeable future, blaming EPA “mismanagement” of the ethanol mandate.  It’s easy to point fingers, but knowing what corn yields are looking like in Indiana, it’s likely that corn prices will be a bit higher in the Hoosier state this crop year. These elevated corn prices, plus weak ethanol processing margins, is what POET saw and so, pragmatically, shut a facility down that was sure to lose money going forward.
AAFC Raises Canadian Wheat Harvest
In their monthly report of supply and demand estimates for Canadian crops, Agriculture Canada revised the potential for this year’s production slightly higher, namely for the wheat harvest.  A lot of analysts’ eyes were on canola production but AAFC only increased 2018/19 exports by 200,000 MT. This translated to 2018/19 canola ending stocks to drop by the same amount to have a 3.7 MMT carryout. With no changes to supply and demand table, 2019/20 canola ending stocks were lowered by the same amount to now sit at 3.775 MMT.
The Canadian durum wheat harvest was raised by 100,000 MT by the AAFC, and with no demand changes, carryout was raised by the same amount to 1.2 MMT. While this is still a 25% / 400,000 MT reduction year-over-year, average 2019/20 durum prices are forecasted to be 10% below the five-year average at $250 CAD/MT (or $5.10 USD and $6.80 CAD per bushel when converting metric tonnes to bushels). The Canadian non-durum wheat harvest was raised by AAFC to 27.4 MMT, up 400,000 MT from last month’s estimate, mainly thanks to expanded acres planted outlined by StatsCan back in June. Demand was raised a little, but Canada’s non-durum wheat ending stocks were pegged at 4.3 MMT, up nearly 20% from 2018/19’s carryout.
Maybe we should take these estimates with a grain of salt though as a lot of the numbers in the forecast from AAFC did not account for the below-freezing temperatures seen last weekend in east-central Saskatchewan. Notably, quite a lot of oats are produced in the area and until recently, oats prices have been mainly watching and waiting for harvest to start up.  Currently, AAFC is estimating that a little over 1 MMT of Canadian oats are headed for the feed column, but after this frost, their number might be a little low. Combined with some rumours of stronger oats exports into the U.S. this summer, Canadian oats endings stocks might be tighter than the 600,000 MT currently being forecasted by AAFC. Accordingly, oats prices might find some strength this fall.
Corn, Soybean Yields from This Week’s Crop Tour
On Wednesday and Thursday, ProFarmer crop tour scouts drove and sampled through Illinois, Iowa, and Minnesota, and the further they went west, it seemed like the crop only got better. Estimates of Iowa’s corn yields show really positive numbers, while Minnesota was not far behind what farmers in the Gopher state were able to accomplish last year.  In Illinois, corn yields are a bit spotty as some of the crop was planted in April, a few fields in May in between the rain, and then the rest in June, and those last acres are actually coming in pretty nice, but again, it’s late.  That being said both corn and soybean yields are expected to take a nosedive in Illinois. 
For soybean yields, the likes of Iowa, Nebraska, Minnesota, and South Dakota might make up for some weaker potential in Illinois, Indiana, and Ohio. Specific to Iowa, soybean yields, like corn, came in better than expected.  On the flipside though, soybean yields in Minnesota were a little bit worse than what was originally expected to be seen. 
The good news is that there is a little bit more rain on the horizon for the Corn Belt, albeit there is also some drier conditions expected for Great Lakes area.  Looking more long-term, the NOAA has been calling for average to possibly early frost dates, thanks to a low-pressure ridge coming down from Western Canada. However, DTN’s weather team says that this is a “weak feature” and that fall weather might actually be a bit more favourable for those late crops than once thought. 
Overall, the best headline I read yesterday came from AgWeb.com, which said “Crop Tour Results Show Best-Case Scenario for Corn, Worst-Case for Soybeans.”  Put another way, soybean yields have some upside yet as the crop is quite immature but has room to improve. Conversely, U.S. corn yields might have peaked. ProFarmer will come out with the national estimates for corn and soybean yields later today, but most agree that we can get a pretty good sense of where things are trending.
Have a great weekend!
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 = $1.3321 CAD, $1 CAD = $0.7507 USD)
Dec Corn: -3.8¢ (-1%) to $3.673 USD or $4.892 CAD
Nov Soybeans: -7.5¢ (-0.85%) to $8.613 USD or $11.473 CAD
Oct Soybean Meal (per short ton): -$1.40 (-0.45%) to $294.30 USD or $392 03 CAD
Oct Soybean Oil (cents per lbs): -30¢ (-1.05%) to 28.35¢ USD or 37.77¢ CAD
Dec Oats: -1.5¢ (-0.55%) to $2.648 USD or $3.527 CAD
Dec Wheat (Chicago): -3.8¢ (-0.8%) to $4.68 USD or $6.234 CAD
Dec Wheat (Kansas City): -3.3¢ (-0.8%) to $4.01 USD or $5.342 CAD
Dec Wheat (Minneapolis): -1.3¢ (-0.25%) to $5.123 USD or $6.824 CAD
Nov Canola: -2.3¢ (-0.2%) to $10.253/bu / $452.10/MT CAD or $7.697/bu / $339.39/MT USD