Expectation versus reality in the grain markets

corn kernels and dollar bills
(Farm and Dairy file photo)

My first job most mornings is to go to the desk and turn on the computer. Not a lot of work, just a 35-foot commute from the bed!

The first look is at the commodities page, however, and some mornings that is not fun. Like this Tuesday morning, when December corn futures are down 4 cents, to 3.70, and November soybean futures are off almost 8 cents, to 892-1/4.

This comes after a positive day when it was starting to look like the low was in.

This comes in a year when it seems inconceivable that we are worrying about low prices after struggling to plant and grow crops that the farmers think are a lot smaller than the boys in Chicago or the number crunchers in NASS and USDA think they are.

USDA numbers

Last Thursday, Sept. 12, we got USDA’s latest offering for Supply and Demand numbers. This runs down what they think we are producing and what happens to it.

There was hope that USDA would lower crop size to numbers more in line with what farmers and their advisors are thinking.

This would be a recognition of acres left unplanted, extremely late planting and a summer that has left most areas behind in growing degree days in a year that we needed extra.

That is what happened last year — we were late, but had a catch-up in sunlight all summer. Well, USDA came through a little in the production numbers.

Analysts predicted a soybean crop of 3.577 billion bushels. USDA actually reduced their estimate from the 3.68 billion of the August report to 3.633 billion.

In other words, they agreed the crop is smaller, but not as small as the industry thinks it is. Similarly, USDA reduced the corn crop from the 13.901 billion bushels of the August report to 13.799 billion.

The trade estimated 13.672 billion. However, USDA had a couple of surprises in soybean consumption.

They reported old crop crush to have been increased by 20 million bushels, and they reported exports to be increased by 45 million bushels.

That reduced our old crop ending stocks to just over a billion bushels at the 8/31/19 end of the marketing year.

I would guess that the exports were better partly because our prices are cheap, and we were more competitive in world markets than previously.

Export outlook

No one is really expecting a huge new crop export increase because of rapprochement with China. That is a wild card that is looking better, but not to be counted on.

Looking better, as in, now better than zero. The Chinese are taking maybe a 1,000 mt of soybeans without tariffs. Six hundred was traded last week.

They are maybe throwing us a bone, as trade talks resume. Or, maybe they are actually hungry, even though their demand has been cut as they liquidate hog herds with ASF.

Lots of “maybes” in there. USDA is looking for a modest 35-million bushel increase in exports for the coming year.

There were no corn surprises, so the soybeans gained 41 cents for the week, but corn was up 14 cents from Wednesday’s close before the report to Monday’s close.

The negative in the report was that the old crop corn had smaller exports and smaller ethanol grind. The result was a carryout at the end of the marketing year of 2.445 billion bushels.

The good news is that we look for a new crop carryout of 2.190 billion bushels. However, that was increased from the 2.181 billion of the August report.

So, if you believe USDA, we are only cutting the crop size 621 million bushels from last year, even though out here in the country it feels like a disaster in many areas.

Pappy always said that nothing was ever anything worse than a farmer says it is. Put me in with the farmer, I guess.

Expectation versus reality

I think it is a whole lot worse than USDA says it is. The summer is too cool, the beans are short. The early beans are half-turned in color, but the late beans still show rows.

All the government and private estimates assume the crop will all get ripe, and that is unlikely in my view.

We will know a lot more in a month or two. We may be happy that prices rally on the reality of smaller crops. Most of us are sure to be unhappy with our yields.


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