Morning Comments August 25, 2022

Agronomy Sprayer Crop Protection

Corn and soybeans ran into selling pressure after both running up to recent highs, while wheat spent much of the day supported. December wheat finished the day 12 higher, while December corn was up 2 and November soybeans were down 4.

Reports from the road on the third day of the Pro Farmer Crop Tour were a bit better. Scouts on the Eastern leg made their way across the rest of Illinois, landing in Iowa City, Iowa overnight, while Western leg scouts traveled from Lincoln, Nebraska to Spencer, Iowa working their way up the far Western Iowa crop districts.

The dryness in Western Iowa remained apparent with all three districts toured coming in below the 3 year average and last year’s estimate, though the reduction was less than what was seen in South Dakota and Nebraska. District 7 or the far Southwestern district in Iowa saw the greatest reduction in potential, with the tour average putting yield at 173.7, down from the 3 year average of 187.8. District 4, the group of counties in the center of the three districts, is expected to see an 8 bushel per acre drop from the 3 year average, with district 1 down 2 bpa. 

Scouts across Illinois gathered 245 samples, finding a slightly above average crop, but one that isn’t as good as a year ago. At 190.7, Illinois yield would be just over 5 bushels lower than last year’s tour findings and just under 5 bushels per acre above the 3 year average. One major difference going forward though is plant health as last year tar spot and other diseases accelerated the crop into a less than desirable finish, while this year it appears the finish will be nearly ideal.

As one well respected analyst pointed out, the crop declined after last year’s findings due to disease pressure and other issues, while this year it appears the crop will likely add into the finish thanks to much better conditions.

Today the tour works across Central Iowa to the north into Minnesota, with both legs meeting in Rochester. The culmination of the tour happens tomorrow after the close with the release of Pro Farmers national yield projection. Analysts remain keenly aware they have been surprised by the Pro Farmer final yield estimate in the past, as it hasn’t always followed the trend of what was seen by tour observers throughout the week.

In other news, we continue to monitor export demand and the progress seen in the Black Sea when it comes to the Ukrainian grain movement. There was some concern expressed mid-week that there could be issues renewing the grain export corridor agreement after its initial 120 days, though those concerns may be unfounded as some analysts believe an automatic renewal clause was built into the agreement. 

In the meantime, exports continue to pick up the pace, with more ships arriving by the day, however, concerns are now being expressed over what new crop production potential looks like. Nearly one third of Ukraine’s wheat area is in occupied or contested regions, with farmers in the areas close to the offensive uncertain as to what the future holds it is unlikely they will plant wheat this fall, knowing harvest won’t come for many months. 

In addition to uncertainty over what the next year will bring when it comes to the war, capital is getting harder to come by and cash prices in the country remain depressed due to burdensome stocks created by an inability to actively export grains for months.

Overnight the Chinese government released 19 policies set to help stabilize the economy and increase consumption. The policies aim to invest in infrastructure, allow for more access to capital by developers and give local governments more flexibility when it comes to supporting their ailing real estate market. At face value it seems exciting to see stimulus in the face of so many governments facing cuts, though many economists say this package will do little to aid the country’s ailing economy.

Looking ahead, members of central banks from around the world will convene in Jackson Hole, Wyoming today and tomorrow for what is likely to be a much-watched event. Fed chair Jerome Powell is set to speak tomorrow, with many analysts expecting his tone to be incredibly hawkish as the Central Bank works to fight inflation and the government has announced nearly a trillion in spending over the last handful of weeks.

Markets are mixed so far this morning, with corn higher.

Corn up 5 to 7

Beans down 1 to 4