Morning Comments September 27, 2021

Bin sunset harvest

The markets are mixed this morning to start the week after a lackluster trade Friday.

Weather forecasts from across the country look to be perfect for harvest with little in the way of rain outside of the Southern Plains and normal to above normal temperatures throughout.

Yield reports continue to come in relatively decent with some pockets of dryness showing up in both the Eastern and Western Corn Belt. Interesting to note that in some parts of the Eastern Belt, specifically Indiana, they are a bit disappointed after a late season dry spell took top end, but many say they are still running average to slightly above average.

In the Western Belt, folks in Iowa continue to be pleasantly surprised by yields with commercials saying grain flow in the area has been more than decent as harvest kicks off. Illinois appears to remain the battleground state with some claiming the crop just isn't there while others are reporting average to above average yields with an occasional record slipping in.

Overall, though harvest is only expected to be around 25% complete for corn and 12% complete for beans, it appears as though there really isn't a reason to assume the USDA will have to make any type of major production adjustment at least from a yield standpoint in upcoming reports. 

In addition to watching harvest reports we will continue to monitor just what is happening in China. Reports of continued rationing of electricity are starting to get the attention of folks beyond the ag sector as we are starting to see signs other manufacturing being impacted as well. 

As you will remember, reports indicate that upwards of 20 soybean crushing facilities in the Northern portion of the country have been forced to shut down recently due to tight coal supplies and a push to curb emissions. 

Initially there was chatter that these plants shutting down was more to do with lacking soybean supply availability in the region than power availability, but now we are hearing stories of factories supplying Apple and Tesla being affected, indicating soybean supply has little to do with it.

In addition to power restrictions, we are still uncertain as to what is happening with Evergrande, as the company continues to struggle, and more is coming to light as to just how perilous the situation there may be. At this point all signs continue to point to a government takeover of the company, but what that means for U.S. and other shareholders remains to be seen.

Interesting to note on the topic of China, we continue to see massive wheat purchases being made by the country. Last week the wheat market was firmer on confirmation China had purchased 10 cargoes of French-feed wheat, with additional large purchases being made from Australia. With global wheat supplies in somewhat of a disarray, China appears to be willing to try and get their hands on a good chunk of it, both to replenish government stocks drawn down a year ago but also to continue to use for feed as well.

From a feed perspective, wheat does tend to be the better alternative, especially considering the slowdown in meal production from limited crushings. Wheat will provide the value of corn while also helping to offset the need for protein in many rations. Continued poor government auction levels of corn offered Friday with less than 10% taken are likely a part of this shift as well. 

Looking ahead, we will get updated export inspection figures this morning at 11:00 Eastern. Many are expecting to see a continued uptick in export shipments as harvest ramps up and Gulf capacity continues to come back online. We will get updated crop progress figures at 4:00 Eastern, with most folks just looking at harvest pace as the important figure there. 

Outside of updates to exports and crop progress, we will see some continued harvest pressure as farmers work through open contracts on the books and start making more sales across the scale. Basis will likely remain a touch under pressure in the interior as well.