Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 9/3/2020 Early Call 8:45am EDT: Corn down 1, beans up 4, wheat steady. Equity markets are mixed overnight, although European indices are posting solid gains, which aren't yet providing any lift to U.S. futures. Energy markets were lower overnight, following through on Wednesday's big losses with spot crude oil prices slipping below the 200- day moving averages for the first time since May. The U.S. Dollar Index is slightly higher overnight, attempting to make it three higher closes in a row, although still close to two-year lows. Precious metals are weaker overnight. Grain markets are mixed overnight with corn lower while the soy complex and Kansas City wheat are firmer. Grains: Wheat for December delivery fell 1% to $5.58 ¼ on the Chicago Board of Trade on Wednesday, with grains traders selling off wheat after it rallied to a four- month high in the previous session. Corn for December delivery rose 0.2% to $3.58 ¾, while soybeans for November delivery rose 0.8% to $9.62. Wheat traders took profits after prices rallied for two days. Forecasts of a larger Russian crop also prompted selling. Wheat was down all day long on more increases in Russian crop estimates and profit taking, throw in some intermarket spreading for good measure. Rainfall is washing away recent strength in grains futures. The precipitation hit the southern Plains and the Midwest Wednesday. Additionally, a strong system will bring scattered showers and falling temperatures early-to-mid next week. While the rains are putting a damper on drought concerns, grains traders are questioning how beneficial these rains will actually be for the 2020 crop. September's WASDE report may prove to be bearish for CBOT grains futures as the market has priced in a good bit of yield loss in both corn and beans, but the USDA has a long track record of incrementally making production changes that may not ultimately show up until later in the year. We could see a bearish surprise against expectations in the Sept. 11 WASDE. Adverse weather conditions including a derecho in the Midwest and drought conditions in some areas are expected to impact these figures, albeit not as much as the market has priced in. Meanwhile, commodity brokerage Allendale Inc. forecast the 2020 US corn yield at 178.3bpa and soybean yields at 51.9bpa, a limited movement from the adverse weather. U.S. farm 1 incomes are expected to jump this year thanks to record payments pledged by the Trump administration to help farmers and ranchers cope with the fallout from the coronavirus pandemic. The USDA projects net farm income will surge 23% to $102.7 billion in 2020, as government payments rise 66% to $37.2 billion. Rainfall yesterday was confined to the far southeastern Corn Belt and far northwestern Belt (see left map). Most of the Midwest stays dry through at least Monday except for a heavy storm cluster for eastern IA and northern IL Saturday night that could bring 0.50- 1.50” of rain. A large system likely generates rain in the Corn Belt and central/southern Plains Tue-Thu and bring similar amounts of 0.50-1.50”, but the exact setup is unclear (see 7-day NOAA forecast map right). Temperatures vary into next week before turning much cooler in at least the Plains, with frost possible in ND and far northern MN. An estimated 55% and 50% of U.S. soybean production was drier than normal the last 14 and 30 days, including 43% and 31% under 50% of normal. With the U.S. harvest season approaching, trade focus is starting to turn towards spring in South America. In Argentina, drought intensifies despite some rain in 10 to 14 days. 98% and 82% of expected Argentina wheat production was drier than normal last 30 and 60 days. A lack of rain in Brazil over the next two weeks is not unusual because rains do not normally start until late Sep and early Oct in the central and north. Ukraine’s grain trader union UGA pegs the wheat crop at 26.6mmt vs. 26.8mmt last month (USDA 27.0mmt). They see wheat exports at 17.5mmt vs. 18.0mmt last month (USDA 18.0mmt). UGA sees Ukraine’s corn crop at 35.3mmt vs. 38.9mmt last month (USDA 39.5mmt). Corn exports are pegged at 29.0mmt vs. 33.0mmt last month (USDA 33.5mmt). Russia’s wheat harvest hit 73.6mmt as the spring harvest continued to make progress, picking up pace last week as favorable weather helped farmers as they near the final stages of this year’s campaign. The total wheat harvest progressed 8.3% to 73.6% of the projected area in the week to September 1, data from the agriculture ministry showed Wednesday. The pace of the harvest picked up over the week as rains in parts of the Urals and Siberia eased. Average yields continued to fall last week as the harvest 2 entered less productive regions in its closing stages, falling 4.5% week-on-week to 3.4mt/hectare. Russia farmers have harvested wheat from 21.7 million hectares or 73.6% from the projected area, with average yields dipping 4.5% week-on-week to 3.4 mt/hectare. The main wheat growing provinces of Argentina of Buenos Aires, Cordoba and Santa Fe have run 17% to 48% of normal precipitation over the last 30 days. I’ve been walking corn fields since 1991 in order to get a preview of the upcoming harvest and I’ve always been surprised that most producers don’t both going out and doing their own yield checks. This year’s checks showed me a good but certainly not record crop as I believe early cold and heat during pollination sapped record potential. Other people out walking fields are largely seeing the same thing. “One thing that seems to surprise growers on farm visits is the actual ear count numbers we've coming up with,” says Farm Journal Field Agronomist Ken Ferrie. “Many fields we're putting 6,000 to 8,000 small ears together to make 3,000 to 4,000 actual ears. Do your kernel counts on the uniform ears and calculate that out against your adjusted ear plants that are broken off or small. I still see some good yields, but I’m not sure they’re as high as some of you think,” he adds. “When someone tells me the crop looks good but doesn’t know their ear count, it worries me. You might be in for an unexpected disappointment.” According to Ferrie, drought conditions could be one of the biggest yield-limiting factors across the Midwest, and late-planted corn and soybeans are at the greatest risk. “In dry areas, beans are getting dinged harder than corn,” Ferrie says. “Most April and May corn is far enough along that the daily water usage has dropped off, we might be taking the top out of some yield, but I predict it is still going to be some pretty decent yields.” For soybeans, the August USDA crop report estimated that the U.S. soybean crop would reach record yields for soybeans of 53.3bpa. The analysis for this estimate was likely done in late July. Since then, the crop ratings have begun to take a nosedive and are expected to drop further as the season closes. It is hard to find a year where crop quality has changed in such a short amount of time. It seems the crop condition are changing so much that the crop reports cannot keep up. By the time they get the information out, it is already outdated. Much of Iowa has gone without rain in the second half of the summer, forcing crops to rely solely on subsoil moisture. Accelerated maturity is now being forced on it very prematurely. According to the latest U.S. drought monitor map, at least 90% of the state of Iowa is experiencing some form of abnormally dry weather. The epicenter of this drought has begun in the west central Iowa region. The drought radius expanded from there to where it now covers most of the state, reaching into eastern Nebraska and parts of South Dakota. Much of this deterioration seems to have happened in a matter of weeks and continues to happen. And this point, damage from the drought is irreversible and rainfall would not do much. The primary benefit of rainfall at this 3 point is to begin refilling subsoil reserves for next year which have surely been depleted. New crop soybean have rallied $1 since our summer lows and is currently trading above $9.50. November beans are going to encounter some pretty heavy resistance at the $9.75 area which will require some further confirmation of bullish news to break through. The market will need to see what USDA comes up with in their September report. This week was about the last chance to pull the soybean crop out of the fire. August was make-or- break for the soybean crop, and it was mostly break. If average soybean yields drop back to July estimates of 49.8bpa, ending stocks could be reduced by 290mb. This could provide the ammunition we need for the market to break above the $9.75 area and get us back to $10 beans. The encouraging thing about corn's price action lately is with the exception of Monday, settlements have been high range and well-off session lows.