This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.
After the close on Friday, we got the final national estimates from Pro Farmer following the conclusion of their crop tour. Throughout the week, the tour found good pod counts in soybeans and good ear weights and kernel counts in corn. However, “good” is not what the market had priced in. To reach USDA’s corn yield estimate of 188.8, we need much better than just “good.” The tour found some pollination issues and disease pressure in certain areas, especially in the East.
For national yield, Pro Farmer estimated 182.7 bushels per acre for corn, which is 6.1 bushels below USDA’s estimate. That’s more than half a billion bushels less production than USDA. For soybeans, Pro Farmer estimated yield at 53.0 bushels per acre, 0.6 below USDA. That’s 50 million bushels less production.
So, keep in mind that Pro Farmer is not gospel — and neither is the USDA. There are still unknowns about this crop. It’s big — we all know that — and that is priced in. The question is: How big?
The USDA has hopefully given us the high-water mark, and the market has absorbed and priced that in. Funds have made a lot of money being short, and end users have sat on the sidelines watching the market get cheaper. A higher close on a bearish report, along with a bit of bullish momentum, has encouraged end users to buy coverage and funds to buy back shorts.
The weather is forecast to dry out and cool off. Many areas have enough subsoil moisture to make it to the finish line without more rain, but not all areas do. The cool temperatures may help in some regions but could bring a premature end to the crop in others.
We also got a bounce at the end of last week on biofuel news. The administration said it was ruling on the small refinery exemptions (SREs) we’ve been waiting for, and the market reacted positively. The actual announcement on Friday left us with as many questions as answers, though.
They eliminated all SREs dating before 2022, which is bullish. But they also said they would revisit the blend requirements for 2026 and 2027, which were considered bullish when first released. It’s hard to imagine they’ll increase them, so the risk is that they’ll be reduced. Once again, the administration kicks the can down the road.
Crop conditions came out Monday afternoon, with the USDA rating the corn crop at 71% good/excellent — unchanged from last week and one point above expectations. That compares to 65% last year and is the best in nine years.
Soybean conditions were estimated at 69% good/excellent, one point better than last week and two points above what the market was expecting. The market will be watching condition ratings but is no longer giving them as much weight as it is to field tours.
The USDA’s next supply and demand update comes out Sept. 12, when it will include some actual field-sampled yield estimates.