Morning Comments August 29, 2022

Harvest gif

Markets were much higher across the board Friday with wheat up 16, December corn up 14, and November beans up 30. On the week we saw December corn gain 41, wheat add 13, with November beans up 57.

Traders were expecting Pro Farmer to come out with a number below current USDA estimates for corn yield, but many were still surprised by the cut in production seen by the group. At 168.1 the corn crop would be 7.5 bushels lower than current estimates and take over 600 million bushels off carryout without adjustments to demand.

Historically speaking, Pro Farmer does tend to underestimate the USDA, coming in below their final yield figure 7 out of the last 12 years. Last year the group came in above the USDA, but much of that was attributed to a significant downturn in crop prospects after the tour due to poor plant health and dryness.

As we mentioned last week, many private groups, weather models and other yield estimates using similar information as the USDA to assess the crop outlook are much higher, with many remaining steadfast corn yields will be 174 or better—even with the dryness and heat.

Comparing this year to last when looking at accumulated stress degree days there is limited difference at first glance, though it is obvious to see the amount of stress in the Southern Plains is far greater than a year ago, while the Northern Plains saw less stress overall. The cutoff in Iowa is incredibly stark as well, with I-80 acting as a dividing line between good and bad. 

The group’s soybean yield projection was slightly below the current USDA estimate at 51.7 bushel per acre versus the USDA 51.9. With heavy rains falling across much of the Corn Belt over the weekend, thoughts are that bean yields could increase from here, though many argue the lower level of pods overall versus a year ago will keep yield potential limited.

In other news, Fed chair Jerome Powell doubled down on his hawkish stance towards the markets, saying the Central Bank will do all it can to provide price stability. Powell was the most straightforward we’ve seen regarding the risk of recession, saying the road ahead will “bring some pain to households and businesses.”

Goldman Sachs continues to contend the US will miss most of the worst economic downturn, pushing investors to reenter commodities on the idea the US economy will remain relatively strong. Eurozone investors may not be so lucky, with energy prices continuing to surge, cutting into expendable household income, and forcing business to slow or shut down. The news was slightly positive over the weekend though, with Germany announcing their goal to fill natural gas storage ahead of winter is ahead of schedule and nearly complete. 

Something to watch moving ahead, the Baltic Dry Index, considered to be the leading indicator of global economic activity, has plunged to summer 2020 lows with global demand seemingly non-existent. 

Looking ahead we will be watching export inspections this morning. With only 2 weeks left in the marketing year for corn and beans, folks recognize we’ll likely have bushels either canceled or rolled forward for new crop movement. We will also get crop progress after the close. It is important to remember crop conditions begin to decline seasonally as we wrap up the growing season and work our way towards harvest.

Corn up 2 to 5

Beans down 10 to 15