Sept. 30 – U.S. Corn Stocks Hit 2.14 Billion

US corn stocks are at 2.14 billion, down 7% year-over-year. Also in this digest: an update on trade, the European crop, and where corn prices go next.

Current Sales Position:

We are 40% sold on 2018/19 old crop corn.

We are 0% sold on 2019/20 new crop corn.

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Good morning,

Corn prices finished the week in the red as harvest and trade pressures continued to weigh on the sector. The December 2018 futures contract shed 0.3% to close the week just above $5.56 per bushel. The March 2019 contract shed 0.3% and ended the week under $3.68 per bushel.

Corn Prices Weekly Performance

Monthly Corn Prices Performance

Quarterly Corn Prices Performance

Managed Money on the Move

On Friday, the CFTC released its weekly update on managed money’s activity. As of September 25th, hedge funds maintained a net short position on corn at 112,779 contracts.

Corn Futures Funds Position

Hedge funds had decreased their short position this week by 28,497 contracts.

Corn Stocks Come in at 2.14 Billion Bushels

On Friday, the USDA released its quarterly stocks report, which showed U.S. inventory levels as of September 1.

The agency said that old crop corn stocks came in at 2.14 billion bushels on September 1.

That figure is down 7% year-over-year from September 1, 2017.

The agency said that on-farm storage hit 620 million bushels. That figure is down 21% from the previous year. Meanwhile, off-farm stocks came in at 1.52 billion bushels. That figure is up 1% from the same period last year.

The agency cited a disappearance of 3.16 billion bushels from the June 1 report that showed total stocks of 5.3 billion bushels.

The U.S. Farmer Remains in China’s Gunsights

While inventory levels drew the big headline on Friday, it was the ongoing trade spat between the United States and China that continues to drive market sentiment.

Last week, the U.S. slapped 10% tariffs on $200 billion in Chinese goods, a move the quickly led to retaliation (although on a much smaller level) by China. The Trump administration says that the U.S. will raise those tariffs to 25% by the end of the year unless a deal is reached between the two countries (read: China caves on intellectual property issues).

The general consensus is that no deal will be reached by the Midterm elections.

And China is trying to influence both the election and public opinion. Earlier this week, China’s largest English-language, state-owned newspaper took out a four-page advertisement in Iowa’s top-read newspaper. The advertorial offered harsh criticism of the Trump administration and cited economists critical of the nation’s trade policy.

Given Iowa’s agricultural production and its presence of the Republican voting base, China is hoping to sway public opinion. In addition, Iowa State University reported that farmers and the state could lose roughly hundreds of millions due to ongoing Chinese tariffs on U.S. soybeans.

But corn farmers are subject to losses as well.

A few key losses in the university’s breakdown are as follows:

 – $110 million — Losses in state tax revenues from lower prices. 

 – $364 million — The result of lower Iowa farmer spending.

 – $348 million — Maximum losses for Iowa manufacturers thanks to higher prices on steel, aluminum, electronics and other inputs for production.

 – $911 million: Maximum losses for pork producers as tariffs price them out of foreign markets.

Crop Progress Update

According to the USDA last Monday, 16% of US corn has been harvested. This figure is up 5 points compared to the same time last year, and the seasonal average.

Corn Harvest Progress

Additionally, 69% of the American corn crop is still rated good-to-excellent (G/E). This figure is up 1 point from last week’s report and is up 8 points compared to last year.

US Corn Crop Conditions

Corn dented for week 38 was sitting at 97%; 4 points ahead of the previous week and the 5-year average.

Also, last week corn matured was sitting at 72%, this is up 21 points compared to the same time last year and up 19 points ahead of the 5-year average.

Going into Monday’s crop report, the seasonal average of corn harvested is 26%. Corn quality is estimated at 58%, corn dented is sitting at 98%, and maturity is estimated at 78%.

U.S. Exports Back in Focus

The USDA reported Thursday morning that net corn sales came in at 1.71 MMT for 2018/2019.

For 2019/2020, the agency cited net sales reductions of 9,700 MT from Mexico.

For the week, export figures hit 1.36 MMT.

US Corn Weekly Exports

The top five destinations were Mexico (342,700 MT), Japan (272,500 MT), Egypt (163,500 MT), Taiwan (139,300 MT), and South Korea (129,700 MT).

What’s Happening in Europe?

This week, the bulk of the headlines centered on U.S. crop stocks and production.

But let’s take a look at a few updates from around the globe.

First, the International Grains Council hiked its 2018/19 world production estimate to 1.074 billion metric tonnes. That figure is up 10 MT from previous weeks.

The group also announced that ending stocks would be 261 MMT, an uptick of 5 MMT.

Both figures are bearish for global prices.

With that said, the other key number to watch this week centered on European imports.

EU 2018/19 maize imports stood at 3.3 million tonnes, down 4% from 3.5 million a year ago.

While European corn imports are in focus, the key nation to pay attention to is Ukraine.

Right now, Ukraine sits as the top exporter of corn to the European Union. In addition to a drought that has hit Europe, U.S. exports to the region have been hit by 25% tariffs due to the American tariffs on EU steel.

Right now, U.S. exports to Europe are off 26.1% from the previous year at 266,872 MT.

Brazilian exports are also off 34.2% thanks to the country’s commitment to bolstering soybean shipments.

Looking ahead, Ukraine is likely to continue pushing corn to Europe as the U.S. struggles with the impact of tariffs on shipments.

Where Corn Prices Go From Here

The macroeconomic factor that slipped under the radar this week was the Federal Reserve’s decision to raise interest rates for the third time in 2018. The central bank could again raise rates in December as it attempts to curb inflation and keep the U.S. economy from overheating.

With that in mind, higher rates have negative impacts on the bottom lines of farmers and weigh on grain prices. This week, we dug into the three major factors that you’ll need to know about higher rates and what they mean for grain prices. Read our insights, here.

Looking ahead, farmers will continue with the harvest, and additional pressures can be expected in the weeks ahead. We will be looking for small opportunities as they emerge.

Corn Stocks vs. Prices

They might not be as likely as in years past, given the huge yield expectations on tap and forecasts for a huge jump in acreage next spring. In addition, ethanol margin pressures are very low, meaning that the critical demand factor could see a slowdown right as harvest accelerates.

To growth,

Brennan Turner
President | CEO

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306-715-4540 (cell)

b.turner@farmlead.com

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FarmLead – North America’s Grain Marketplace

GrainCents

 

 

Sept. 23 – Where Corn Prices Go From Here – Corn Weekly GrainCents Digest

Sept 19 – StatsCan’s Satellites Update Corn Yields to 160.1 Bushels

Sept. 16 – USDA Corn Yields Bite into Grain Prices – Corn Weekly GrainCents Digest

Sept. 12 – September 2018 WASDE: U.S. Corn Yields Hit Record High

Sept. 9 – September WASDE Preview for Corn Prices – Corn Weekly GrainCents Digest

Sept. 2 – Corn Prices Seek a NAFTA Bounce – Corn Weekly GrainCents Digest

August 31 – 13.8 MMT of 2018 Canadian Corn Production

August 26 – Corn Yields Rising Up – Corn Weekly GrainCents Digest

 

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.