It is only late August and yet I secretly wish that 2019 would hurry up and come to an end.
The agricultural world continues to fret over the complexity of the current marketplace as continued unanswered questions dominate farmer mentality. Market price volatility is exasperated; weather, government programs, crop insurance, an immature crop, demand destruction, and the potential for an early autumn and winter, is keeping many involved with agriculture quite anxious.
As the calendar flips to September, I can only think about weather and demand destruction. As of the most recent weekly crop progress report, only 55% of the nation’s corn crop is in the dough stage, versus a five-year average of 76%. For corn in the dent stage, that is also behind at 15% versus the five-year average of 30%. Looking at soybeans, only 68% of the nation’s crop is setting pods versus the five-year average of 85%.
We all know how late this crop got planted, and now the question becomes, can the crop make it to the finish line? We are at the mercy of Mother Nature for the coming months. This year, if there is any sign of an early frost, or even an “on time” frost, the market will likely respond quickly with higher prices similar in fashion to 1993. In 1993, the harvest low for corn occurred the day after Labor Day. Prices then rallied all the way into the new year.
In the accompanying chart, you can quickly see different yield and ending stock scenarios. Remember, if the perception is that the ending stocks number is getting smaller, then prices will often times rally higher. Most feel the current yield number from the U.S. Department of Agriculture is too high.
How much that yield number comes down in the future depends on weather. What a complex, historical year for sure. The August USDA yield for corn is pegged at 169.5 bushels per acre. A recent crop tour thought the yield to be much lower at 163.3 bushels per acre. Soybean yield from the August USDA report is pegged at 48.5 bushels per acre and a recent crop tour feels that yield will be lower, coming in at 46.1 bushels per acre.
Lastly, I wanted to point out the reality of demand loss. On the most recent August USDA report, total demand for corn was pegged at 14.130 billion bushels. It seems like a lot, but for as cheap is corn is right now, you’d think demand would be larger. The reality is that we have lost demand for ethanol, exports and even in the food, seed and industrial category. Looking at the August USDA report for the 2017-18 crop year, corn demand back then was larger at 14.798 billion bushels. Soybean demand is down as well, with the biggest loss of course in export demand.
Stay vigilant over the coming weeks and months. This market place is not yet finished. This crop is not yet finished. Our trade war is not yet finished. Much can change with weather, much can change with price, and there will likely be opportunities to price grain along the way. It ain’t over yet.
Editor’s note: Naomi Blohm is a marketing advisor with the Stewart-Peterson Inc. and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at firstname.lastname@example.org.