Weekly Market Update – September 6, 2019

Storm Update
Looks like the Carolinas escaped the worst of this storm. There are some bands with big rain totals over 10 inches but overall most inland areas made it with very minimal damage other than small areas where tornadoes touched down. There was some wind but have not heard of too much cotton or even corn that was significantly damaged. The tobacco crop probably took the worst of it.  

The first week of September did not start off much better for corn than August. Many dry areas in the Midwest got rain and forecasts are showing warmer than seasonal temps for much of the corn belt through the end of the month. The weather right now is bearish until we get some sign of a frost threat. FC Stone and Allendale released their yield estimates which fell very close to USDA (168.4 bu and 167.7 respectively). So that was no help to the bulls. The crop needs an extended growing season to even have a chance to get to USDA’s yield, and right now, it looks like that is what we are getting. Trump promised last week that he would announce a “BIG DEAL” solution to fix the ethanol demand he undermined with the refinery exemptions but we have seen very little to no details or progress announced. We have all grown weary of promises tweeted without much follow up. We have seen very little followup on the Japanese trade deal. Everything seems to be going for the bears right now and against the bulls. We need something to spark a recovery, US weather, South American weather, trade progress, real solution to the ethanol demand destruction, harvested yields lower than expected. We get another USDA update next Thursday which we are not holding our breath to get the spark we need. 

The biggest positive we have right now is BASIS. Basis is much stronger than we have seen in many years in just about all markets. Even with the hurricane panic harvesting, the basis continues to get stronger. DO NOT SELL A POSTED BASIS ANYWHERE WITHOUT TALKING TO US! The posted numbers are strong, but almost all of the mills have been pushing from posted numbers to get bushels. Everyone needs to buy all they can of the local crop.

Whenever we sell any 2019 corn, we need to be selling 2020 corn as well!! Without major changes to the balance sheet, corn is not going to have to compete very hard for acres so baring another historic weather event, the sales we make this fall may be the best sales we make for 2020. I hope it is the cheapest we sell, but we need to manage risk!

Soybeans were holding on well compared to corn until this week. The whole complex fell apart this week after the announcement of trade talks starting back with China in October. I guess the market read it wondering why they were not starting earlier rather than as significant progress toward coming back together. Soybeans are in the same shape as corn as far as needing longer than normal growing season so there are still a lot of questions to be answered. South America is starting off dry, but that will not matter for a few weeks. However, it is something to be watching. Domestic crush and exports have been strong, but not enough to make up for the lost Chinese demand.

Sell beans above $9, both 2019 and 2020 crop!!

Wheat finally got a chance to be a leader as dry weather in Australia and too much rain in the US plains give some concerns about harvesting the spring wheat. Overall wheat has been very weak following the feed grains lower with a stronger US dollar pressuring. Basis remains strong on wheat if you need to move any to make room for corn or beans.

Cotton ratings continue to drop as more heat and dry weather is called for Texas. However it is not enough to pressure the US balance sheet and thankfully the hurricane did not reduce the Southeast crop. I know I am a broken record, but cotton needs a deal on trade with China! World balance sheet is tightening but it does not help us much if we cannot export to China. World economic indicators turning worrisome again and a stronger US dollar is not helping either.

This is an interesting graphic from White Commercial. They do not have very good data for our area, but you can see what the rest of the Midwest looks like. Local basis will tell the true story of the cash grain markets, and if corn is more expensive in the corn belt, then it should be more expensive in the southeast after adding transportation costs to move it down here. Hence why you need to talk to with us before selling posted basis to ensure you are making a thorough decision!