My mother always warned me to be careful in what you wish for as if or when you do receive it, it may not be really what you want. I guess I should have heeded that warning as it pertained to the August crop estimates as instead of producing clarity, the USDA has just muddied the waters for many in the trade, and most specifically for the corn market. No doubt the most controversial part of the report centers on trying to reconcile the number of prevented plant acres to the total acres the USDA maintains have been planted. For corn, we find 11.21 million PP, 4.35 million beans, and 2.209 million wheat. For wheat, that number is right on the mark compared to acreage planted last year, but for corn and beans combined, we seem to have lost around 4 million somewhere. Possibly more incredulous for many was the fact that at 90 million acres of corn, this would have suggested that the intentions were to plant somewhere around 101 million acres this year, which would have eclipsed the modern era peak in corn acreage of 97.2 million set in the 2012/13 crop year. Keep in mind as well, the incentive to plant corn in the spring of 2012 was a might better, 5.00/5.75 December futures, than it was in the spring of 2018, 4.00/3.65. I am not really going to try and dissect the corn yield of 169.5 bpa, +3.5 from last month other than to say it is 4% below last year but still comes in at the 4th highest on record. The reality of all of this is that, as so many of us stated after the June acreage number, it will really not be until harvest that we will have a solid handle on the crop size this year and instead of playing the game of trying to outguess the USDA, we should have been content to wait for the combines to roll. Of course, at that point, in many respects, you no longer have a futures market or at least a future-looking market. For now, we are back to the starting gates.
Crop conditions are little more than a footnote in the mix of information yesterday, and both corn and beans came through with unchanged readings; 57% good/excellent for corn and 54% beans. 39% of corn is in the dough stage compared with a normal 61% and 7% dented versus the average 16%. Needless to say, there is a considerable amount of acreage that will be at risk with even a normal frost date. 54% of beans are setting pods, compared with 76% on average, and 89% of winter wheat is harvested versus the normal 96%.
It might surprise you to hear that WH Group of China, owner of Smithfield Foods here in the U.S., reported a 17% drop in profits for the first half of 2019 and this on a 3.7% increase in the number of hogs slaughtered in their home nation. While one might suspect they would see a turning in fortunes during the second half of the year as the prices of pork push higher but with fewer hogs now coming to market, that may not be the case either.
One final interesting story this morning that comes from Japan. According to sources there, President Trump has requested of Prime Minister Abe that Japan purchase “huge amounts” of U.S. ag products, which if you want to try and read between the lines, could suggest that there will be nothing good coming from U.S./Chinese trade negotiations anytime in the near future. Supposedly, the Japanese could warm to the idea if it was structured as a food support program for Africa.
Corn and wheat remain under pressure this morning while beans have stabilized and bounced a bit. Keep in mind as well that markets, in general, are ill at ease this week. Concerns of a global economic slowdown continue to escalate. In addition to the ongoing trade war, fears have been heightened by the uncertainty of Brexit, and now and upset in the recent elections in Argentina where the pro-business party of President Marci was handed a significant setback. Interesting times.
Morning Market Audio 8/13/19
Chicken or Egg: Which came first? It's enough to make you wacky!