Disaster Averted

Published on: 21:36PM Jun 18, 2019

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Well, there you have it.  Corn is now 92% planted, beans 77%, and 8% of the winter wheat has been harvested so evidently disaster has been averted.  Of course, we know that is not correct, but gauging from the price reaction in the overnight hours, one could be led to believe that was the sentiment of more than a few in the trade.  Actually, prices open a smidge higher when trade began, but obviously, there were not enough buyers to sustain the strength, and we have witnessed a wave of profit-taking. One might as well get used to such action as I suspect that between now and the time we get a decent peek at the pollination window there will be more than a few fits and starts and volatility should escalate so hold on to your hats as the ride will be bumpy.  

While I suspect there will be some additional corn acreage that will yet show up as planted, using the original estimate this means that as of last weekend there was still 7.4 million acres unplanted.  63% of this is concentrated in Illinois, South Dakota, Ohio, and Indiana ranked in order.  The possible worst-case scenario this would translate to planted acreage of 85.4 million. Using the same harvested percentage and yield as did the USDA last week (both would seem optimistic) this project production of roughly 13 billion bushels, or just over 2 billion less than the original estimate.  Considering that the USDA also previously projected a 2.485 billion bushel ending stocks figure, it stands to reason that we have a bit of demand rationing to do. Needless to say, the 38% advance we have posted in spot corn since mid-May has done much to accomplish this task, not to mention provided some in corn deficient region to begin booking imports as we covered last week but I have to believe that with the uncertainty yet of what lays ahead in the growing season, it would be challenging to think that any setback in prices will be rather shallow for the time being.  

Even though prices do not seem to reflect it this morning, at 77% planted, the bean progress was just a bit behind trade expectations.  This would suggest that we have around a whopping 19.5 million acres left to plant, one has to believe that the USDA estimate for 84.6 million is no longer realistic, nor would be a yield of 49.5 bpa.  Just for the sake of the exercise, if we lowered the bean acreage number 1.1 million to 83.5 and cut yield 1 bushel, it would trim 141 million bushels from production and potentially that much from ending stocks.  The problem is, that would still leave us with 904 million bushels for the year-end inventory.  Yikes! To even take us back down to the 2017/18 ending stock we would need to see a reduction of 600 million bushels and using a yield of 48.5 bpa, that would require a loss of 12 million acres. Yes, there could be a spike in demand but keep in mind that at current USDA estimate of 4.195 billion usage, it is the 3rd largest on record and only trails the largest by 101 million or 2.4%. This is not to say that beans could not become excitable to the upside, but headwinds remain stiff.  

Outside of the problems in Australia where ABARE trimmed the wheat forecast by another 18% as drought continues to plague the nation, there is little positive on the international scene.  AgroConsult now estimates that Brazil will export 38 MMT of corn this year, which is up from a previous estimate of 31 MMT and last year a total of 24 MMT.  If correct, it will eclipse the prior record of 31 MMT set in 2017.  African Swine Fever is not doing world demand any favors either and Vietnam estimates that they have culled 2.5 million hogs to date, and the spread of the disease is not yet contained.  Granted, this pales in comparison to the possible 100 to 200 million that may be lost in China, but all add up to lower feed grain demand.

Finally, in Brazil, the safrinha corn harvest is now estimated to be 10.2% harvested, which is nearly 7% ahead of average.  AgroConsult bumped their estimate for the total corn crop to 101.2 MMT and Dr. Cordonnier raised his 1 million to 100 MMT.  The USDA stands at 101.  Soybean harvest is complete with a crop estimated to come in at 117 MMT.  Further south in Argentina, the corn harvest is estimated to be 42.3% complete and crop estimates remain unchanged at 49 MMT. Bean harvest in that nation is close to wrapping up, estimated at 98.5% with the estimate standing at 56 MMT.  Total South American corn production is estimated to be 155.3 MMT (USDA) which is up 30% from last year’s 119.4 MMT and total bean production is pegged at 186.6 MMT, compared with a year ago at 172.8 MMT, an increase of 8%.