This week’s action:
Corn Dec23 down 8 at $4.75
Beans Nov23 down 25 at $13.38
KC Wheat Dec23 up 13 at $7.35
Fats October up 3.55 at $187.05
Feeders October up 4.925 at $264.40
Hogs October up 1.00 at $83.10
Corn Dec24 down 1 at $5.07
Beans Nov24 down 14 at $12.81
KC Wheat July24 up 18 at $7.35
As expected, yield was adjusted lower for both corn and beans. Corn yield dropped to 173.8 which was .4 bushels above the average estimate. Soybean yield dropped to 50.1 which matched the trade estimate. This supports the idea most everyone agrees with that the late heat and dry weather hurt the crop as it finished the growing season. Additional yield cuts are possible in October and November as we get harvest data. The negative side of the report, which is what the market appears to be digesting, came with an increase in harvested acres for both corn and beans. Corn acres increased 774,000 and soybeans were raised 95,000. The increase in acres and lower yield resulted in a higher overall production on corn by 23 million bushels from the August report and reduced soybean production by 59 million bushels.
Corn production is estimated to be nearly 770 million bushels greater than last year. Projected corn carryout is 2.22 billion bushels compared to 1.45 billion bushels this past year.
Overall soybean production is estimated to be 4.146 billion bushels compared to 4.276 billion last year. Soybean carryout is projected to be 220 million bushels while last year was 250 million bushels.
It’s a funny time of year. Some farmers are in full blown harvest mode while others are still irrigating. Futures action was boring this week, but front-end basis has been moving daily (sometimes hourly) as end users are competing for early bushels. Yield reports are generally disappointing but within expectations given this year’s growing conditions.
The chart below from RJO reflects the “Producer/Merchant” net futures position. How to read this: the more “short” the merchant/elevator is, the more corn they own (they sell futures when they buy from farmers). This is the least short they have been in years reflecting very little new crop ownership. With little forward ownership and large futures carry to deferred months, look for end users and elevators to keep bids firm through harvest to fill space.
My personal view: farmers will do their best to get fields with potential multi-peril claims to town quickly, while storing and ignoring the other bushels until harvest is over and U.S. production is more known.
Below is a graph from White Commercial reflecting the storage costs of corn and soybeans. Storage hasn’t been this expensive in 15 years. Look for farmers to sell beans and hoard corn.
Outside of a few sporadic showers, next week should present good harvest weather, especially in the Eastern corn belt.
The European Central Bank raised interest rates for the 10th straight month, marking the highest rates since 1999.
The United Auto Workers (UAW) went on strike this morning this morning. More than 12,000 workers are striking at General Motors, Ford, and Chrysler production facilities.
What are the workers asking for?
- 40% increase in hourly pay over 4 years
- Reduced 4-day, 32-hour work week
- Shift back to defined benefit pensions
- Cost-of-living adjustments
- 5+ weeks of vacation, more paid holidays, extended parental leave
Ford claims it would have lost $14.4 billion over the last four years if these demands had been in effect, rather than recording nearly $30 billion in profits.
Researchers at the Federal Reserve have issued warnings about possible disruptions in the U.S. Treasuries due to hedge funds’ short positions hitting a record high. They are betting on rates to go down. They may be right, but in the mean time, they could be on the hook for sending a lot of cash out the door to individual bond holders.
Consumer Price Indexes:
Something That Probably Means Nothing:
Quote of the Week:
“Don’t judge each day by the harvest you reap, but by the seeds that you plant.” – Robert Louis Stevenson