The following marketing analysis is for the week ending Aug. 30.
CORN — What changed this week to move the markets? Nothing really. The market continued to consolidate ahead of the long Labor Day weekend and the Sept. 12 World Agricultural Supply and Demand Estimates report. The weather wasn’t threatening, but neither did it push the crop to maturity. Overall temperatures remain cool, but no frost is in the forecast for the next 10 days.
Players got a little better idea of where planted acres are headed for the September WASDE report when the Farm Services Agency issued a report which raised both corn and soybean acreage from their latest report by approximately 800,000 acres. The change pushed corn acres up to 86.7 million acres. For soybeans, they have acreage at 74.8 million acres. The August WASDE report used 90 million planted corn acres and 76.7 million soybean acres.
From a technical perspective, December corn posted a key reversal higher at mid-week after trading to its lowest point since mid-May. For the week, December corn held above the $3.63.75 contract low and traded a range from $3.64.25 to $3.77 per bushel. It closed 2 cents higher this week at $3.69.75 per bushel. The July 2020 contract was up 1.75 cents at $3.97 per bushel. For the month of August, December corn was down 40.5 cents, its biggest percentage monthly decline in four years.
U.S. corn conditions improved 1 percent week-on-week as of Aug. 25 to 57 percent good/excellent. Seventy-one percent of the crop was in the dough stage vs. 87 percent on average. Only 27 percent of the corn was dented compared to 46 percent on average which is the eighth slowest on record. A farmer survey by Farm Futures estimated U.S. corn acreage will increase 4.5 percent in 2020 to 94.1 million acres. U.S. soybean acres are predicted to increase 9 percent in 2020 to 83.6 million acres.
Weekly old crop export sales were poor with net cancellations of 100,000 bushels. New crop sales were better-than-expected 33.8 million bushels. Total old crop commitments are 1.97 billion bushels vs. the U.S. Department of Agriculture's outlook for 2.1 billion bushels with one week left in the marketing year. Total new crop commitments are 218 million bushels compared to 441 million bushels on the books last year.
Weekly ethanol production was up 15,000 barrels per day to 1.038 million bpd, but is still down 3 percent for the same week last year. It’s estimated that corn for ethanol usage is down about 5 percent this year vs. last year. Ethanol stocks were down 400,000 barrels to 23 million barrels. Last week saw announcements of at least one eastern belt ethanol plant closing and another reducing production. This week we saw a southern Minnesota plant announce their closing due to poor margins. A cut to U.S. corn for ethanol usage on the September report will be expected. President Trump promised to make an announcement of a “giant package” to increase biofuels usage. Some CEO’s of ethanol companies have reportedly warned President Trump not to approve changes to the Renewable Fuels Standard. President Trump is expected to announce an increase in federal mandates next week. U.S. farmers have been raising concerns about recent increases in exemptions of small oil refineries from RFS requirements.
Outlook: Another relatively boring week with action centered on month end pricing of delayed price bushels and cleaning up September positions. Funds are carrying a net short position with little weather premium believed to be built into current prices. The forecast for the next two weeks stays cool, but with no immediate threat of a frost/freeze. Technically, we could be setting up for a bounce ahead of the September WASDE report as we ward off any new contract lows.
Looking ahead to this winter, the Farmers’ Almanac is forecasting “bitterly cold winter conditions” from east of the Rockies to the Appalachians from the last week in January through the beginning of February.
SOYBEANS — November soybeans traded to their lowest point since late-May when they fell to $8.66 per bushel in the middle of week. A key reversal higher at mid-week led to firmer markets ahead of the three-day weekend. For the week, November soybeans were 12.5 cents higher at $8.69 per bushel after closing higher four out of the last five trading sessions. The July 2020 contract was up 6 cents, settling at $9.14.25 per bushel. November soybeans were down 12.5 cents for the month of August.
Supportive chatter this week came from news that China had made a phone call to the United States to propose a return to the negotiating table. China denied the call, but late in the week China stated they were having “effective communication” with the United States. If no agreement is reached, the next round of U.S. tariffs on Chinese goods is to take effect Sept. 1. Brazilian farmers were heavy soybean sellers this week as the Brazilian real fell to its lowest level in nearly a year. China was reportedly buying Brazilian soybean cargoes throughout the week.
Weekly old crop soybean sales were better than expected at 3.5 million bushels. Total old crop commitments are 1.8 billion bushels vs. the USDA forecast for 1.7 billion bushels. China still has 1.9 million metric tons of unshipped old crop bushels on the books so we may or may not see everything get shipped in this marketing year. New crop weekly sales were at the low end of expectations at 13 million bushels, bringing total commitments to 206 million bushels compared to 486 million bushels last year. This year’s new crop sales are the lowest in 13 years for this date. With the exception to China, U.S. soybeans are competitive on the world stage. Next week’s July USDA soybean crush is estimated at 178.5 million bushels. If accurate, it will be the biggest monthly crush since March.
The weather remains cool across the Midwest and the market is aware we need some heat to finish the crop. A saving grace is the absence of a killing frost in the near-term forecasts. Crop conditions as of Aug. 25 showed soybeans improved 2 percent to 55 percent good/excellent. Illinois indicated a 10 percent increase in good/excellent conditions. This is still the lowest U.S. rating for this week since 2012. Ninety-four percent of soybeans were blooming on this date vs. 99 percent on average and 79 percent were setting pods vs. 91 percent on average. This is the second-slowest rate on record for setting pods.
Fires in the Amazon rainforest continue. Comments from a reliable source said there is no real impact to agricultural areas. Some wildfires are attributed to a burn down on pasture land, but it’s still considered a wildfire. Conab is forecasting Brazilian soybean acreage this coming year will be up 1.7 percent to 89.9 million acres. They expect Brazilian corn acreage to increase 5.7 percent to 45.2 million acres.
Outlook: Weather and politics will stay in the forefront of news items into the Sept. 12 WASDE report. We know the crop needs time and cooperative weather to get to the finish line. At these levels, it doesn’t feel like the market has factored in much of a weather premium. As for politics, traders are tired of all talk and no action. Funds are carrying a mediocre net short position and don’t seem in any hurry to move much in either direction. Traders want definitive action on the trade war with China to get excited, so we’ll watch and wait.
Nystrom's Notes: Contract changes for the week ended Aug. 30: Minneapolis December wheat plunged 17.75 cents to $4.96.75, Chicago dropped 15.25 cents to $4.62.5, and Kansas City fell 7.5 cents to $3.97.25 per bushel. Crude oil rallied 93 cents for the week to close at $55.10, ULSD gained 1.5 cents, RBOB managed a quarter-cent gain, and natural gas was up 13 cents.