Morning Comments - Time for the Ref to step in

Published on: 08:35AM Aug 12, 2014



As you might suspect, the action overnight and into this morning is all about the August production and supply/demand reports.  We find little fresh in the overnight news so trade is likely dominated by position squaring.

The average estimate for domestic wheat production is looking for an increase of around 21 million bushels to 2.013 billion in response to potentially stronger spring crop yields but the bigger surprise could be in the world numbers.  While the European crop may be plagued with quality issues the reported yields have been solid and as we have discussed a number of times, the Russian crop could be 7 to 9 MMT larger than the last USDA estimate. 

The winter wheat harvest has continued to progress at a pace just above average and stands at 95%, but spring harvest is getting a slow start.  As of August 10th only 6% of the crop had been harvested compared with an average of 21%.  Idaho and Washington were the only two states reporting progress ahead of normal.  The overall condition of the crop remained unchanged with 70% rated good/excellent.

Exports did pick up a bit in the past week as we shipped 19.4 million bushels versus expectations between 12 and 18.  This brings the year to date total up to 167.39 million bushels, which still lags last year at this time by 30%. 

We shall see what surprises if any are uncovered at 11:00 central and more importantly how the market reacts to the news itself. 


After posting a nice little bump higher yesterday, the corn market is back under pressure overnight as we tread water in front of the August report. This technically is the first "real" report of the year as the USDA blends surveys with physical counts and if there are measurable ears, which there should have been this year, factor that into population counts and plant health to come up with a number.  Of course, this should be more accurate than a basic beauty contest with statistical data factored in but I suspect that the trade will quickly estimate what ever the figure is to be understated.  Point being, even if the numbers were below trade estimates, rallies would be short-lived. 

It would not have been a surprise to see a slight drop in crop conditions this past week but that was not to be the case as we remained at 73% in the good/excellent category.  Silking was reported at 96% and corn in the dough stage has reached 54% compared with the average of 46%.  This is the first week of reporting the dent stage, which was at 11%, compared with 16% on average and last year at 5%.  Southern states are beginning to make a little harvest progress with Louisiana at 6%, Georgia at 7% and Texas at 17%.

Exports inspections were sluggish once again as we shipped 35.6 million bushels, which was right at the low end of expectations.  This brings year to date exports up to 1.727 billion.  To reach the USDA target of 1.9 billion we would need to average 57.6 million per week for these final three weeks of the marketing year.  On the bright side, exports are up 262% over last year at this time.  

The average estimate for the yield number today is just over 170 b/p/a and production of 14.239 billion bushels.  The 2014/15 carryout could be posted above 2 billion and as I have mentioned before, this should be one of those psychological breeches once it has occurred.   We shall see what Uncle Sam has in store for us at 11:00 central and just as important; how the market reacts to the news.  Once beyond this figure, I suspect the debate as to the maturity of the crop and possible freeze concerns will soon begin.


For the better part of the past five weeks, bulls and bears have been battling it out for dominance in new crop beans with November futures stuck roughly between 11.20 and 10.55.  With the game still tied, it would appear that the USDA has the potential to step in as the referee of sorts and give the ball to one side or the other but odds would seem favor it will be to the bear.

Crop conditions did slip a bit for beans last week with 70% now rated good/excellent, down 1%.  Regardless, this is still exceptional.  Beans blooming remain right around average at 92% and setting pods are 7% ahead of average at 72%.  Difficult to find much worthy of concern in those numbers.

Export inspection remain at least consistent.  For the week ending August 7th we shipped 3.6 million bushels, compared with the 4-week average of 3.35 million and the 10-week average of 3.8 million.  Year to date we have now moved 1.586 billion bushels but to reach the USDA target of 1.62 billion, we will need to ship 11.4 million per week for the next 3 weeks. 

As with corn, I suspect at any number that is released today will be discounted by the trade as light.  With the weather outlook for the balance of August pretty conducive to finishing out this crop, it would need to be surprisingly low to excite much buying.  If the recent lows at 10.55 give way, I suspect we will be making a quick trip down to the 10.00 level.