Marketing

Grain Outlook Drop in crop estimate rallies corn

The following marketing analysis is for the week ending Aug. 13.

CORN — Finally some bullish news for the corn farmer! The December corn contract continued to bounce between its 100 and 50-day moving averages leading up to the Aug. 12 World Agriculture Supply and Demand Estimates report. The fireworks in the aftermath shot the December contract to $5.94.25 per bushel and filled the overhead gap left on July 6. The rally was ignited when the U.S. Department of Agriculture slashed the corn yield to 174.6 bushels per acre from 179.5 bu./acre and compared to the trade estimate of 177.6 bu./acre. This was counter to what usually happens in this report. The trade usually underestimates the yield as they have PHYLLIS NYSTROM CHS Hedging inC. St. Paul done in four of the last five years. The updated yield projection fell below even the lowest estimate.

The USDA is predicting record corn yields for Illinois at 214 bu./acre, Indiana with 194 bu./acre, Ohio at 193 bu./acre, as well other various states outside the heart of the Corn Belt. Minnesota’s corn yield was pegged at 166 bu./acre, down 13.5 bu./acre from last year. For the last three years, the corn yield has fallen from August to the final report and has declined in eight of the last 11 years.

The 2021-22 ending stocks number was 1.242 billion bushels, down 190 million bushels from July and 1.297 billion bushels estimated. Production declined 415 million to 14.75 billion bushels and vs. 15 billion estimated. Feed usage was cut by 100 million, FSI was raised by 10 million, and exports were lowered by 100 million bushels.

December corn traded as much as 35 cents higher on report day but only closed 14 cents higher. This did, however, break the contract out of a nearly threeweek funk of sideways trading. The upcoming crop tour which begins Aug. 16 will be closely watched for confirmation or rebuttal of the USDA’s yield estimate.

The 2020-21 corn balance sheet showed FSI usage up 40 million (ethanol up 25 million) and exports down 75 million to 2.775 billion bushels. Ending stocks were up 35 million from last month at 1.117 billion bushels versus 1.096 billion bushels and were carried to the 2021-22 sheet.

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $6.28 +.07 $13.47 +.07 Edgerton $6.38 +.15 $13.22 -.13 Jackson $6.33 +.18 $13.23 -.01 Janesville $6.26 +.09 $13.30 +.13 Cannon Falls $6.08 -.12 $13.47 +.11 Sleepy Eye $6.13 +.03 $13.26 +.06 Average: $6.24 $13.33 Year Ago Average: $2.82 $8.57

Grain prices are effective cash close on Aug. 17. *Cash grain price change represents a two-week period.

Brazil’s 2020-21 corn crop finally experienced a significant drop by the USDA of 6 million metric tons to 87 mmt, but it sits atop most of the private estimates. Conab dropped their forecast to 86.7 mmt and AgRural is at 82.2 mmt. Argentina’s corn crop was unchanged as expected at 48.5 mmt. China’s 2020-21 and 2021-22 corn imports were steady at 26 mmt although many private forecasts are higher. World corn ending stocks for 2020-21 were neutral to slightly bearish at 280.8 mmt vs. 278.7 mmt estimated and 279.9 mmt last month.

World ending stocks for 2021-22 were bullish at 284.6 mmt. The average trade estimate was 288.2 mmt and 291.2 mmt last month. Ukraine’s 2021-22 corn exports were raised from 30.5 mmt to 32 mmt.

Weekly export sales were excellent for old crop at 14.9 million bushels and good for new crop at 23.7 million bushels. Old crop total commitments are 2.76 billion bushels vs. the updated projection at 2.775 billion bushels. China has 86.6 million bushels of old crop left to ship. New crop commitments continue to run ahead of last year at 712 million vs. 452 million bushels last year.

Weekly ethanol production was down 27,000 barrels per day to 986,000 bpd and was a 13-week low. Ethanol stocks fell 33,000 barrels to 22.3 million barrels. Gasoline demand dropped to 9.43 million bpd and is 5.1 percent below the pre-Covid 2019 level. Ethanol margins were down 2 cents at 28 cents per gallon.

Outlook: It looks like we’ve moved the December corn range up from the $5.30 - $5.65 area to the $5.50 - $6.00 per bushel range. This week’s crop update was friendly for corn, but traders are skeptical the USDA cut the corn yield as much as they did on this report. The trade will be monitoring Brazil’s corn harvest as their safrinha corn production numbers continue to shrink. How this will translate into more export business for the United States is yet to be determined, but it could provide additional support to corn. In post-report trading, the weather was taking a backseat to the updated numbers as the benefits of late rain are narrowing. We haven’t seen a daily export sales flash for corn in weeks despite the good weekly number this week.

September corn this week closed 13.25 cents higher at $5.68.25 and the December 2021 contract rallied 16.5 cents to settle at $5.73 per bushel. Don’t forget to look at the December 2022 corn contract. Its contract high at $5.34.25 per bushel was set May 7 and it closed this week at $5.16.75 per bushel.

SOYBEANS — November soybeans didn’t receive the report shock that corn did, but it still traded 29.5 cents higher to $13.69.5 before tailing off to close just a penny higher on report day. The USDA dropped the 2021-22 U.S. soybean yield .8 bu./acre to 50 bu./acre when the trade was expecting 50.4 bu./acre. Record yields are projected for Illinois at 64 bu./acre, Indiana at 60 bu./acre, Ohio at 58 bu./acre, and Missouri at 50 bu./acre. The soybean yield has declined from the August to final report in four of the last six years, but higher in six of the last 11 years.

The USDA left the carryout for 2021-22 at 155 million bushels vs. 159 million estimated. This was achieved by a greater carry-in, smaller production at 4.339 billion bushels, and a 20 million bushel cut to both the crush and exports. The gains were extended into the weekend with seven … yes, seven … consecutive days of daily export sales flashes from the USDA combined with the friendly WASDE report to keep buyers interested. In seven daily flashes, a total of 62.8 million bushels of new crop soybeans were sold to China and unknown.

The 2020-21 balance sheet lowered crush 15 million bushels and exports 10 million to raise ending stocks 25 million bushels from 135 million bushels last month to 160 million bushels. The trade had estimated the carryout at 148 million bushels. The average farm price was lowered by 15 cents to $10.90 per bushel and stocks to use at 3.5 percent.

The world balance sheet for 2020-21 rose to 92.8 mmt from 91.5 mmt last month and compared to the trade estimate for 91.4 mmt. Brazil’s soybean crop was unchanged at 137 mmt and Argentina was reduced by .5 mmt to 46 mmt. The 2021-22 balance sheet indicated ending stocks at 96.2 mmt vs. 94.7 mmt estimated and 94.5 mmt last month. China’s soybean imports for 2021-22 lowered 1 mmt to 101 mmt. Brazil’s soybean production for next year was unchanged at 144 mmt and Argentina was unchanged at 52 mmt.

Weekly export sales exceeded expectations with 3.6 million bushels for old crop and 41.1 million bushels for new crop. Old crop total commitments are 2.28 billion bushels vs. 2.26 billion estimated. New crop commitments are 430.7 million vs. 660.5 million bushels on the books last year.

Outlook: The soybean yield will still be influenced by upcoming weather events, but demand has been very strong for new crop. The United States is com-

See NYSTROM, pg. 20