This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Last week, the Pro Farmer Crop Tour dominated the headlines. This week, we started off the week pricing in the final yield numbers they gave us Friday after the close. Corn led higher to start the week, and beans were weaker on the Pro Farmer numbers. Every state they sampled estimated yield lower than last year. Some were significantly lower even than the average over the last few years. In the western belt, they found damage from the extreme temperatures, as expected. Many had thought the crop in the east could offset the damage in the west since they had ample moisture in the eastern belt. But the scouts found delayed maturity and yield loss from too much water in the east. Illinois was supposed to be the garden spot, but even there they found lower yield estimates than last year. For soybeans, they found pod counts below last year and below the three-year average, but with adequate moisture and moderate temperatures to finish the growing season, beans should reach full potential. There is still very strong yield potential in soybeans, depending on how the rest of the season goes. The tour travels the same route each year, and they give state-by-state estimates for each state covered. That estimate is not their estimate of final yield for those states, just the yield potential measured at the time. It can end up higher or lower, depending on how the season finishes and on the areas outside those sampled. When they released their numbers after the close on Friday, they used the data from the tour samples and incorporated all the other data available, including satellite data, to estimate where they think final U.S. yield and total production will be.
Pro Farmer’s corn yield estimate was 173.2 bushels per acre, which is 7.5 bushels below USDA’s last estimate of 180.7. That is a massive drop and pulls total production down by 669 million bushels. USDA’s projected new-crop carryout was 1.653 billion bushels, so if production drops by that much and demand does not change, it would put carryout below 1 billion bushels, which is uncomfortably tight. For soybean yield, Pro Farmer projected a national yield of 53.3 bushels compared with USDA’s last estimate of 52.7. Their production estimate was only up by 50 million bushels compared with USDA. Even though pod counts were lower, Pro Farmer is taking the weather forecast into account and projecting the crop to finish stronger than last year.
The funds were big buyers last week and to start off this week. The Pro Farmer Crop Tour was a big part of that, but fund buying was also driven by the Treasury Department’s bond repurchase program announced last week and any funds left short buying back positions. Bean strength last week was driven by daily Chinese purchases of U.S. beans. We have seen new Chinese purchases nearly every day as they are making goodwill purchases ahead of Xi’s visit to Washington in September. If China gets to the 25 million metric ton target the U.S. side said they agreed to buy, it is going to tighten up the balance sheet more than the market will be comfortable with.