This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Grain markets were closed Monday for the Labor Day holiday so all weekly reports were delayed by a day this week. We continue to see low volume range bound trade as the market watches the finish to the growing season and starts the pivot from watching weather to watching harvest progress and continuing the debate about yield and demand.
Condition ratings came out Tuesday and provided a spark to the market as good/excellent ratings dropped more than expected in corn and beans after the extremely hot and dry finish to the growing season. Corn ratings dropped 3 points from last week in the good/excellent categories to 53% putting us back just below last year’s rating on this week of 54%. The market had only expected a drop of one point. Notable state declines were a 10 point drop in Illinois (to 57%) and South Dakota (44%), 9 point drop in Missouri to only 32%, and 5 point drop in Iowa to 49%. On soybeans, nationwide ratings dropped 5% this week to 53% good/excellent compared to 57% last year. The market was only looking for a 3 point drop. Illinois dropped 10 points to 58% and Kansas dropped 12 points to 25% good/excellent.
The heat in the Midwest has abated much earlier than many of the forecast models had predicted but we are now past the point that growing season weather matters very much. El Nino seems to be finally exerting its influence on US weather after not having much of an effect all summer. We all need to hope for a wet fall to put more water in the Mississippi river to help basis. If the pattern does not change soon, we could be facing water levels lower than last year’s records causing difficulties for logistics for both grain and crop inputs.
We have seen narrow ranges and low volume again this week as the market is in a holding pattern waiting on USDA’s latest guidance coming out this Tuesday, Sept 12th at noon. Last month’s yield estimate from USDA only used survey and satellite data but the Sept report will use actual yield estimates taken from fields across the country. The ProFarmer crop tour showed us that the crop is not as good as it looks from the road as there has been stress at some key times of production. Several very widely followed research companies have released estimates this week. Some have come in very close to ProFarmer while others have come in closer to USDA’s Aug estimate. There will be much debate about the size of this crop for probably the next year at least.
The market does expect USDA to trim yield at least some in corn and soybeans. Even with some yield loss, corn should still have a decent cushion on the US balance sheet but beans will be a different story. USDA is going to have to get creative with the numbers if they do trim some bean yield. The uncertainty in yield should keep some support in corn but the cushion is going to limit the upside. Soybeans however may have to ration US demand or price high enough to bring more imports into the US later in the marketing year. But once focus turns to the South American crop, the world balance sheet has more cushion. Unless there is a weather problem in South America, beans will see weakness after US harvest.
All of this depends on USDA coming in within expectations next week. If they give some unexpected numbers somewhere, all bets are off. We can argue with it until we are blue in the face but next Tuesday will give us the numbers we will be trading until we start getting harvest reports in earnest.