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The week in review
September 26, 2019

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Little changes were made to the crop condition ratings last week. Corn was unchanged at 55 percent, good to excellent, and soybeans were down one point to 54 percent, good to excellent.

Soybeans were setting pods on 95 percent of acres, which still leaves 3.8 million acres that have not set pods.

Leaves were dropping on 15 percent, which is 22 percent behind average.

For corn, 68 percent was dented, which is 21 percent behind average.

Corn mature was at 18 percent, also 21 percent behind average. The report included the first harvest progress figures of the year. Corn was stated at 4 percent harvested, compared to 8 percent a year ago and average is 7 percent.

At the end of September, the USDA will release their quarterly grain stocks report. This report will get even more attention this year than most. With the end users struggling to secure corn ownership and near record basis values being paid across wide areas of the U.S., much of the year has many questioning the large old crop corn carryout that is being forecasted by the USDA. Recent years have shown that the September quarterly stocks report rarely shows a significant difference from the September supply and demand estimates. In the past twelve years, the largest difference stated in reports was in 2010 at 322 million bushels. The average variance has been less than 70 million bushels over this time.

Late last week, reports of a drone attack on Saudi Arabia caught headlines across the energy complex. This led crude oil prices to the highest intraday gains in 30 years. Traders continue to monitor the situation in the Middle East after the attack that shut down 50 percent of Saudi oil exports. Officials are suggesting that Saudi Arabia is close to 70 percent restored on the 5.7 million barrels per day production lost due to the attack. Expectations are that the remaining oil production lost will be back online in 2 to 3 weeks. The crude market has since stabilized falling off recent highs.

Tensions between the U.S. and China appear to be easing. Along with purchasing soybeans, China announced they are sending their deputy finance minister to Washington to start the groundwork for trade talks slated for early October. There are still issues that need addressed, but both countries have made goodwill gestures showing progress towards a deal. The U.S. postponed a tariff increase on $250 billion worth of Chinese goods until October 15th, while China lifted tariffs on some agricultural goods. Skepticism remains among many in the industry, but it was interesting to see the South China Post published that the U.S. and China are close to agreeing on an interim trade deal as soon as next month.

A recent wire released that a Chinese government official, stated there is serious doubt the plan to implement E10 in 2020 will happen. He stated this is due to the lack of available corn stocks and slow development of ethanol production capacity. Currently, the state corn inventory is estimated at 56 MMT compared to over 200 MMT in 2017. The proposed 10 percent ethanol mandate would require around 45 MMT a year.

Weekly ethanol production in the U.S. has dropped to the lowest levels seen since April on poor returns. Margins fell on the week and are now said to be roughly 2 cents per gallon in the red. Inventory levels jumped a large 739,000 barrels to over 23 million barrels. Reports of idling plants continue to circulate. Meetings between President Trump and rural senators are being scheduled to search for a remedy for the struggling sector.

The National Oilseed Processors Association (NOPA), released their latest crush report on Monday, September 16th. They reported that 168.1 million bushels were crushed in August, 6 million more than the average guess and near the high end of the range of 169 million. This was 9.2 million more than August last year and now stands at 42 million ahead for the 11-month period. The current pace is well ahead of the 30 million bushel increase used by the USDA. This increase could prompt the USDA to improve demand on next month's balance sheet.

For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at mhoover@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.

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