Q: As USDA’s bearish August report becomes smaller in the rearview mirror and we get closer to USDA’s September updates, what are your impressions of what has occurred? What is yet to come in terms of production adjustments? Do you see either new-crop corn or soybean values exceeding their summer highs?
Crop Reports Expose USDA-Farmer Gulf
By Peter Meyer, Senior director of agricultural commodities, PIRA Energy Group
The World Agricultural Supply and Demand Estimates (WASDE) released in August proved once again USDA needs farmers and farmers need USDA. Yet the divide between the two has never been wider. It mimics the political rhetoric in our nation’s capital.
On one side there’s the National Agricultural Statistics Service (NASS), fighting against budget cuts. On the other side there’s the U.S. farmer, fighting for his or her financial survival. The result was a farmer production survey that saw a 70% return rate, the lowest in five years for August and down about 5% from the five-year average. The poor response rate painted an incomplete picture: One state’s responses were down 15% year over year. That left NASS to fill in the holes in its Crop Production report.
In variable years such as 2017, farmer input is critical. Corn yields can easily come down from here, but the die has been cast. Without more farmer participation going forward, USDA yields will show little movement. President Abraham Lincoln, paraphrasing a Bible passage, once said, “A house divided against itself cannot stand.” That’s the situation in which U.S. agriculture finds itself. The blame game must stop in order to move forward.
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Buy Back Bushels On Paper Where Needed
By Brian Roach, President, Roach Ag Marketing
USDA’s August report has faded, but remnants remain deeply entrenched in the charts we monitor. Our advice remains only on the buy side of corn and wheat for end users or for growers who want ownership into 2018.
Lows for the next crop year are being carved out on this opportunity or perhaps the next one in the agency’s September batch of reports.
Traders are likely assuming corn and soybean yields are smaller than outlined in the August report, but it looks like they are also planning on more bearish data from USDA.
Added risk is also tied to yields that are outperforming expectations in the Northeast and mid-South states, where 12% of the corn crop added 2.5 bu. per acre to the August estimate compared to yields this past year.
The highs have been printed in the pre-harvest period for this year, but most years we see corn prices advance 30¢ to 50¢ while soybean prices make $1.50 to $2 moves into the South American growing season. If your farm is looking at cleaning out grain bins before the arrival of the new crop, we would recommend buying those bushels back on paper in July 2018. This strategy will help ensure the farm is prepared for whatever the USDA publishes.
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