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Monday, August 19, 2013

Cornbelt Update:  August 19th Issue



 

Farmgateblog.com today is pleased to offer an introduction to a sister media publication, Cornbelt Update.  Cornbelt Update is a weekly digest of marketing, agronomic, and farm management information targeted toward the Cornbelt farmer.  Please enjoy this, the August 19th issue.  Subscription information follows the newsletter.

  • Corn prices. Do we have a bottom in the market?  The Dec futures chart may have just formed the center point for a distribution pattern, and if so, prices will slowly work their way higher.  But it was a bushel of fundamentals this week that reversed the slide, including the Aug. 1st report cutting new crop production and carryout, the FSA’s certified acreage report, and weather concerns that include both an early Sept. frost and high heat this week. Since Aug. is on track to be the 9th driest since 1960 across IA, IL, & IN, rain is needed and not heat, which will reduce crop ratings.  Throughout most of the Cornbelt, the lack of heat has hurt, slowing growth and throwing the crop into jeopardy of an early frost halting maturity, as hinted by private weather services. Some light will be shed on the issue with the Pro-Farmer crop tour this week. Interestingly, Purdue’s Bob Nielsen says, “All things equal, cooler temperatures during grain fill typically result in heavier kernels and higher grain yield." But that would be negated if the weather turns hotter and drier.  USDA has cut its 2013 yield estimate to 154.4 bu. which is 2.3% below the 30-year trend line that would be 158.1 bu. this year. The lower estimate resulted from the use of a 5-year average ear weight that included the light 2012 data and could be too light for the actual yield.  Traders questioned IL, IN, & OH yields as being too low, and were concerned about the 1 bil. bu. in ND, SD, MN, IA, & WI that may not mature.  But with the lower estimate, futures recorded a daily reversal up; a healthy signal the market is ripe for a meaningful recovery rally.  Basis levels also firmed with Decatur bidding $1.55 over Sept, which drops to 15¢ in Sept.  Cedar Rapids is bidding $1.65 over Sept, which only drops to $1.25 in Sept, on expectations of very little corn.  15 mil. bu. were shipped the prior week, helped by lower prices. (Jan corn is $9.65 on China’s Dalian exchange.) New crop sales last week were 33 mil. with 2 mil. canceled, bringing new crop sales to 32% of the 2013-14 marketing year expectations, ahead of the 5-year average of 22% for mid-August. Ethanol production increased 4,000 barrels per day last week to 857,000 barrels with the help of lower corn costs. However, USDA said it would put more sugar on the market to avoid forfeitures in the sugar program, and that moves surplus sugar into ethanol.
    1) Sep 13 corn closed at $4.7375, down 7.75¢ for the day and up 8¢ for the week.
    2) Dec 13 corn closed at $4.635, down 8.75¢ for the day and up 10.25¢ for the week.
    3) Dec 14 corn closed at $4.9975, down 9¢ for the day and up 10¢ for the week


  • Soybean prices.  Substantial gains were recorded for the new crop, primarily based on a 500,000 cut in acreage, weather threats to maturity, and continuing tight supplies even with a near-record crop in the offing.  USDA’s Aug. 1st estimate of 42.6 bu. per acre was lowered because of pod weights, and with dryness spreading across much of the soybean production area that will not improve much, if the possible early frost occurs. The Aug. 1st projection is traditionally lower than the final, but it has been too high in 3 of the past 5 years. With a 77¢ gain in Nov futures over the past week, the market is pricing more risk premium into the soybean crop than corn, with a soybean to corn ratio now of 2.7 to 1. Market technicians looked at the price action and saw Nov soybeans turn the week’s reversal upward into a strong possibility of a monthly reversal-up, which would point to a bullish trend.  Traders expect profit-taking around $12.75, and expect long term trade in the $12 to $13 range until the South American crop can be better estimated.  Authorities in Brazil projected a South American crop of 5.8 bil. bu. in 2013-14 based on higher prices enticing larger acreage. However, US weather quickly could move that range by $1-$2. The Decatur basis is $1.65 over Nov.  Cedar Rapids is bidding $1.75 over Nov, with Sept bids dropping to only $1.00 over Nov. Comparatively, Jan beans are quoted at $19.83 on China’s Dalian exchange. China is our best customer, buying 285 mil. bu. in July. In the past week, at least 60 mil. bu. were bought by China, with exports reaching 47% of projected sales for the new marketing year.  It is usually 30% by this time of year. NOPA announced the July crush at 116.3 mil. bu., just below the expected range of 117 to 125 mil.  USDA’s projection for a 3.255 bil. bu. crop, and 220 mil. bu. in ending stocks may require rationing again next year, since stocks are not being built.
    1) Sep 13 beans closed at $12.8325, down 5¢ for the day, up 64.75¢ for the week. 
    2) Nov 13 beans closed at $12.5975, down 6.25¢ for the day, up 77.5¢ for the week.
    3) Nov 14 beans closed at $11.765, down 14¢ for the day, up 14.25¢ for the week.
  • Wheat prices.  Thanks to wheat feeding, the wheat market has been riding the back of the corn market, but with feed demand shifting back to corn, demand for feed wheat is diminishing.  But any corn-related rally for wheat will dampen its demand on the export market which has been the strength of wheat prices in recent weeks.  Export inspections the prior week reached 24 mil. bu. and shipments are at 125% of the old marketing year.  Current US wheat prices are higher than most competitors.  New export sales were 18 mil. bu. in the past week, boosted in part by the higher quality of US wheat compared to other suppliers.  The overall demand for wheat remains high for the fourth consecutive year, and while stocks will not have to be rationed, they have been slowly diminishing over time.  The winter wheat harvest has made the final turn, and is at 92% complete, which is just above the 5-year average.  The spring wheat harvest is only 6% complete, versus 24% for the 5-year average.  Spring wheat conditions are reported 66% good to excellent, a slight drop from the prior week.  The wheat markets received some support in the past week when the Farm Service Agency reported 1.7 mil. acres of wheat were prevented planting.    
    1) Sep 13 wheat closed at $6.31, down 6.5¢ for the day and down 2.5¢ for the week.
    2) Dec 13 wheat closed at $6.435, down 6¢ for the day and down 3.75¢ for the week.
    3) Jul 14 wheat closed at $6.605, down 6.75¢ for the day, and down 4.5¢ for the week.

  • Prevented planting acres moved the market on Thursday, helping December corn gain 17 cents and bean to gain 26 cents on the CME.  Notice the hotspots in northern ND, central WI, and on the IA/MN border. Gold-colored counties reported 10-20% of their acres as unplanted and the red-colored counties reported more than 20% of their corn as unplanted.  Details on the USDA’s certified acreage report and the prevented plant acres can be found at Farmgateblog.com.

  • The following table indicates the FSA-certified corn and soybean acres planted in the 12 Cornbelt states, along with their respective acres which were filed as prevented plant.  The Cornbelt states hold 78% of the prevented plant corn acreage of the nation and 69% of the soybean acreage that could not be planted, according to the FSA’s certified acreage. Recent years have seen certified acreage 3-4 mil. acres less than actual acreage.
      
    1) Corn acres could rise because of late planting, even after the extended sign-up deadline.  In 2009 FSA’s estimated prevented planting for corn was just under1.9 mil. acres, but the final acreage was 500,000 under that. In 2010 FSA estimated prevented planting near 2.1 mil. acres, but the final increased by 300,000 acres. In 2011, FSA estimated prevented planting at nearly 3.0 mil., but the final acreage dropped 400,000. USDA’s 2013 certified acres totaled 88.6 mil. with 3.411 mil. for prevented planting.

    2) Soybean acres could also rise beyond Thursday’s estimate. FSA Thursday reported 2013 certified acres about 72.1 mil compared to the NASS estimate of 77.2 mil., and reported prevented planting acreage at 1.6 mil.  Again, with the extended sign-up deadline not all acreage may have been tallied. In 2010, USDA estimated 1.3 mil prevented planting acres and the final acres dropped 1.5 mil. In 2011, USDA reported 1.4 mil prevented planted acres, but there was no change from the certification and final acreage reports.                       

 

State

total corn

PP corn

total beans

PP beans

IL

11,495,067

201,763

9,074,274

113,007

IN

5,834,741

66,985

5,053,397

29,442

IA

13,229,626

613,257

9,106,024

106,350

KS

4,082,277

40,623

3,402,255

1,075

MI

2,147,861

17,793

1,613,681

8,774

MN

8,229,205

616,671

6,361,571

203,760

MO

3,175,345

245,420

5,385,281

59,528

NE

9,711,425

10,906

4,664,363

2,590

ND

3,397,731

498,837

4,284,768

418,046

OH

3,622,287

4,112

4,229,333

14,512

SD

5,615,093

83,945

4,236,590

82,404

WI

3,801,880

264,193

1,506,922

86,647

Total

74,342,537

2,664,504

58,918,460

1,126,134

  • USDA’s August 1 Crop Report last Monday is old news, but there are several noteable items that have market impact.  The corn surprise stemmed from the esimated production of 13.67 bil. bu. which the market expected to be much closer to 14 bil. bu.  The soybean curiosity is USDA’s export demand estimate is less than what already has been sold. 

  • Corn surprise. The primary surprise when the NASS numbers were released came from the estimate of new crop corn ending stocks, which was much lower than anticipated by the market.  The estimate of 1.837 bil. bu. was expected to be much closer to 2.0 bil., but was lowered due to lower 2013 corn production resulting from fewer acres and lower ear weights.  Globally, corn stocks remain high, boosted by the projected US 2013-14 carryout.

  • Soybean curiosity. Foreign buyers will have to give back some soybeans already delivered to them to reconcile USDA’s estimate of export demand, which was 1.315 bil. bu.  That number had been lowered from the July report of 1.350 bil. to reconcile supply and demand.  But we have already shipped 1.317 bil. with 49 mil. bu. of unshipped sales.

  • Many unanswered questions remain from the USDA’s domestic and global supply and demand reports. US 2013-14 soybean carryout of 220 mil. bu. was lower than expected. If South America has a big 2013-14 crop and fixes its logistics dilemma, the US export forecast of 1.385 bil. bu. may be too high.  If China’s economic engine slows and food demand softens, that would imply fewer US soybean exports and more 2013-14 carryout.

  • If you are in the soybean exporting business, China should be at the top of your priority list.  Chinese livestock nutrition specialists have convinced the country’s leaders and farmers that soybeans should be a prime feed ingredient for livestock feeds.  With the growing population wanting more meat in their diet, along with needing cooking oil and other soybean-based foods, Chinese demand is more than the rest of the world combined.
  • Looking  at USDA’s August 1 estimates, it is easy to detect the weather variations across the Cornbelt with the higher yields seen in OH and IN, compared to IL & IA.

 

State

corn acres

 yield

production

bean acres

 yield

production

IL

11,900,000

165

1,963,500,000

9,350,000

47

439,450,000

IN

5,900,000

166

979,400,000

5,230,000

50

261,500,000

IA

13,500,000

163

2,200,500,000

9,430,000

46

433,780,000

KS

4,200,000

116

487,200,000

3,690,000

36

132,840,000

MI

2,470,000

158

390,260,000

1,890,000

45

85,050,000

MN

8,200,000

166

1,361,200,000

6,630,000

41

271,830,000

MO

3,250,000

130

422,500,000

5,640,000

39

219,960,000

NE

9,800,000

161

1,577,800,000

4,750,000

47

223,250,000

ND

3,600,000

116

417,600,000

4,360,000

32

139,250,000

OH

3,680,000

172

632,960,000

4,530,000

50

226,500,000

SD

5,300,000

138

731,400,000

4,650,000

36

167,400,000

WI

3,250,000

144

468,000,000

1,670,000

42

70,140,000

Total

75,050,000

 

11,632,320,000

61,820,000

 

2,670,950,000

  • With less volatility in its major grain commodities, the Chicago Mercantile Exchange lowered its margins charged for opening initial contract positions on the Board of Trade.
    1) Initial margin for corn futures was cut 25% from $2,700 to $2025.
    2) Initial margin for soybean futures was cut 11.8% from $4,590 to $4,050.
    3) Initial margin for wheat futures was cut by 16.7% from $3,240 to $2,700.

  • A wet fall for the central and eastern Cornbelt and average temperatures across the Midwest are the official NOAA forecasts for September, October, and November.  IL State Climatologist Jim Angel says, “Both of these outlooks show a large area of ‘increased chances of above-average’ across IL and surrounding Midwest states. If that comes to pass, it could present challenges with maturity, dry-down, and harvest of the corn and soybean crop in IL.”

  • With Mother Nature’s sprinkler shut off for the past month, the Drought Monitor has recaptured portions of the central part of the Cornbelt that recently were declared to be normal.  With a designation of “abnormally dry” the extent of the drought rapidly grew during the past week into MN, WI, IA, MO, and into IL.

  • Remember soybean aphids? It has been quite a while since you fussed with them, but the recent weather has been conducive for increased populations.  They like the type of temperatures you have also been enjoying.  IL entomologist Mike Gray suggests you may find some, but if numbers are low, look for lacewings and lady beetles and other predators that will keep numbers low before you rush to apply an insecticide. The economic threshold for soybean aphids remains at 250 aphids per plant with 80% of plants infested. The actual economic injury does not generally occur until aphids reach 675 aphids per plant, but the threshold gives you time to apply the rescue treatment since they quickly multiply.

  • Soybean rust has not been on your radar for a while, but you may want to bone up on where it is and how to defend your farm.  The national soybean rust extension and education center indicates newly found spores were in AR and northern AL, just across the TN border, and that is as far north as they have been, and as early in the growing season as they have been that far north.   Sentinel fields in TN and KY have been negative so far.

  • Southern rust has also avoided much publicity, but you’ll need to scout your corn for this fungus, from which your corn has no defense, except an aerial fungicide spray.  IL plant pathologist Carl Bradley says late-planted corn, particularly at the R2 stage or earlier should have a dose, if you find the fungus.  More mature corn is not as susceptible.  It is similar to common rust which will not hurt yield, but no hybrids are resistant to it.

  • Goss’s Wilt continues to spread eastward, and is now found as far east as IN, and north to Canada.  Pioneer agronomists say yields can be cut by 50%, depending on weather conditions and hybrid susceptibility.  They recommend full season scouting. Since it is a bacterial infection, fungicides will not help. Management is accomplished only through weed control, rotation away from continuous corn, and use of resistant hybrids.

  • Pre-harvest #1. When you start watching moisture in corn after black layer formation, 15-20 growing degree units (GDU) are required to lower the moisture 1% from 30% down to 25%. To lower the moisture from 25% to 22%, each point will require 20-25 GDUs, and to lower the moisture from 22% to 20%, each point of moisture will require 25-30 GDUs.

  • Pre-harvest #2. The date of corn maturity can be determined from the date of silking, and if you know when a particular field silked, it will mature earlier than a field that silked later.  That will give you a good order of fields to harvest.  While grain moisture is important in that decision, so is the crop condition, which may pre-empt moisture.

  • Pre-harvest #3. You probably already have plans for harvesting at a certain moisture percentage, whether that is driven by the market or crop condition.  If you know how much corn you will need to dry, make your order for propane and lock in your price. Your price of propane may be above or below that of dockage for wet corn, so compare.

  • Pre-harvest #4.  High moisture corn does not separate easily from the cob; so cylinder, rotor speed, and concave clearance are the adjustments most critical to reduce grain damage and threshing losses. At high grain moisture you may have to strike a balance between damaged grain and higher than normal grain loss from unshelled cobs.

  • Farm Bill embers are barely glowing on Capitol Hill.  Members of Congress have returned home for their August recess and are being congratulated for their good work, so little will change when they return for only 9 legislative days in September.  Although the Farm Bill has been on the front burner for nearly 3 years, a new lobbying group wants to weigh in and seek another one year extension.  Heritage Action, which is a strongly conservative group wants to have input.  The group is seeking to further eliminate farm programs and increase food stamp cuts well beyond the $4 billion per year approved in the House.

  • It was almost surreal, when newly-minted EPA administrator Gina McCarthy attended the Iowa State fair and said, “My commitment to you is that at the end of my term, we will have a stronger, more productive, more trusting relationship between EPA and the agriculture community. Why are we going to do that? It benefits me, it benefits you and it will make this country stronger.”  Farmers in the audience said they had a warm feeling after the speech, but environmental activists say EPA proposals are too weak and they have no such warm feelings.

  • Who gets paid first on your farm?  Right! Your family comes first, and they are getting more expensive.  IL economists studied 1,300 farm families and their non-capital living expenses and found a $76,668 average or $6,389 per month, up 6.6% from 2011.  Another $8,344 was used for capital items, such as a car, furniture, etc. for a total of $85,012 in 2012, up from $79,658 in 2011. That increase is $615 for capital items, and $4,739 for non-capital.

  • Income tax and social security taxes went up in 2012, if you did not notice. IL economists studying family living costs report a 35% increase pushed it to $26,718. Medical expenses averaged $10,100 which included insurance and out of pocket costs.  Non-farm incomes are also increasing, and averaged $36,778 in 2012, up 42% in the past 10 years.

  • USDA also says kids are getting more expensive.  The cost of raising a child is now $240,080 for one born this year until the age of 18. Of that amount, housing is 30%, health care 8%, transportation 14%, clothing 6%, food 16%, child care and education 18%, and 8% for miscellaneous expenses. Rural kids do cost less because of lower housing costs.

  • Mark your calendar. The Farm Progress Show arrives in Decatur Aug. 27-29 at Progress City on the northeast corner of town.  Details are at www.farmprogressshow.com. It is at Exit 144 on I-72.  12 streets this year, plus exhibitors will also be outside of the fenced area in the parking lot.  40 acres of additional parking are being provided because of the unusually large crowds anticipated for the many new rollouts of farm equipment technology.  The picture atop this issue of the newsletter is the machinery staging area where equipment is offloaded and held until the time for exhibitors to move it into place.  I will be broadcasting from the WAND-TV location at the Sloan Express exhibit on the south side of First Street, across from Deere. Catch all of the broadcasts on www.WANDTV.com if you are outside the broadcast area.

Cornbelt Update is a weekly publication .  Forward subscription requests to:  StuAgNews@aol.com.  Cornbelt Update can also be branded as a corporate or agribusiness newsletter to clientele.  Please inquire about the potential opportunities for your business. 

Posted by Stu Ellis on 08/19 at 10:10 PM | Permalink

Comments

Hello! I see that you posted a lot of fundamental details for the grains product. I actually run a site with a blog that talks about the technical side of the grains such as the Soybean Oil, Soybean, and Malaysian Crude Palm Oil Futures - FCPO. Perhaps we can work together in the future.. Take care and keep in touch!

Posted by: Tech Trader at August 25, 2013 12:12AM

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