This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Futures markets continue to try to price in all the uncertainty going on in the world right now, the changes in their fundamentals as the Northern Hemisphere growing season comes to a close, and all the shifts in money flow. We have a USDA report coming out today, Sept. 11, at noon. This will be the first report that their yield estimates will use objective field survey data in addition to the farmer surveys and satellite imagery. USDA will also adjust acres using any additional FSA data since the August report. In the last few years, surprises on acres have been as big as surprises in yield. Changes to the balance sheet will be driven mostly by changes to the current crop production rather than changes in old-crop carryout. USDA will give us “final” old-crop size on the quarterly stocks report that will come out on Sept. 30. The market expects USDA to lower yield for corn and beans. The average estimate is 178.4 bushels per acre for corn compared with USDA’s last estimate of 180.7 and Pro Farmer’s estimate of 173.2. For soybeans, the average estimate for yield is 52.5 compared with USDA’s last estimate of 52.7 and Pro Farmer’s 53.3 bushels per acre. There has been a lot of adverse weather since Pro Farmer’s estimate. There is also a wide range of expectations on yield for both corn and beans. That means the market does not have a strong opinion of what USDA is going to do. The market does expect carryout to be reduced on corn and possibly on soybeans as well.
Historically, this report can be a big market-moving report. But this year, there is so much going on in the world causing the money flow that the fundamentals may not be the most important factor in the short run right now. It is counterseasonal to have such a strong rally going into harvest. The market has been pushed by money flowing into commodities that is only partially due to the supply and demand of those commodities. If we get a bearish report but see energy prices continue to rally and China continue to buy U.S. beans, we may not get much of a correction from the report. The flip side of that is that if the money flow turns due to something in the outside markets, the market could move lower even if the fundamentals of supply and demand are looking more bullish.
This week saw wheat trade big moves in both directions. The headlines are causing the whiplash, as there is a lot of talk about peace between Ukraine and Russia, but both sides continue to hit each other harder and harder. There was a proposal to not hit civilian shipping, but Russia responded by hitting vessels headed to Ukrainian ports. Russia claims they contained military materials. The market is bouncing between responding to the words about peace and the actions of continued violence. China is rumored to have bought over 1 million metric tons of beans just this week. Chinese purchases are ramping up ahead of the meeting with Trump and Xi later in September. Rallying energy prices, especially diesel, is also helping pull soybeans higher.
Outside markets are going to continue to drive market direction. There is significant upside in all the commodities if funds continue to buy, but the market has given us a gift going into harvest. We need to be taking some risk off the table.