This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Today is Election Day. The hope from the market’s perspective in the short term is that we know who the winner is. There have been so many promises made by both sides that we do not know what outcome is bullish or bearish for which commodities for quite some time. But we do that a disputed election or if the outcome is not known for an extended period of time will not be friendly to the commodities.
Corn harvest was estimated at 91% complete when the average is only 75% for this week. Soybean harvest was estimated at 94% compared to the average of 85% for this week. We have absolutely flown through harvest this year but the last of harvest is going to go a bit slower. We are seeing the first widespread rains through much of the middle of the country in many weeks. It help newly planted wheat get started which should be reflected in winter wheat condition ratings next week. This week wheat was only rated 41% good/excellent which is only 3 points higher than the week before. The winter wheat crop started out with one of the lowest ratings in a long time.
The rapid harvest of near record crops in both corn and soybeans should have caused basis to collapse and spreads to widen but that is not what we have seen. Here are the 5 most likely possible explanations that I have seen: 1) Maybe the acreage numbers we were using were too high. USDA gave us a big surprise on the June report and then lowered it some based on FSA data, but maybe we are still overestimating how many acres are being harvested. 2) Maybe demand has been much bigger than estimated and has been able to absorb it all. 3) Maybe the dry conditions at the end of the season took more moisture and yield out of the crop. 4) Maybe yield estimates were too high. We have seen bigger yield penalties from tar spot and other diseases on untreated acres and falling prices have encouraged producers to look for areas to cut costs on inputs. 5) Maybe the carries the market offered earlier in the season were locked in and bought more space. I would say the truth will be some combination of all of these factors and more. We can say it has been a very interesting fall and not at all like we had anticipated.
We hope the lows are now behind us. Corn has managed to hang on to support due to strong and growing demand. Beans are under pressure from good weather in South America. We will get USDA’s latest estimates this Friday, November 8th at 12 noon eastern. The really big report we are all waiting for will be out on January 10th. On that report, USDA will have to reconcile their estimates of crop size with the actual grain stocks we have on hand. That will be the “final” estimates of US crop size.