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The abnormally warm temperatures that appear to be speeding up the drying process and by extension harvest are weighing on the traders’ minds this morning as well as prices. Considering that we finished last week on a relatively positive note, particularly in beans, the pressure this morning is rather insignificant, but sometimes when you get up on the wrong side of the bed, it is tough to shake off those negative feelings. Possibly exacerbating this is the fact that, incredibly, we are now into the final week of September which means next week brings us into the final quarter of 2017. I had a conversation over the weekend with a producer who told me they were planning to kick off harvest that afternoon and as you might suspect was really anticipating what kind of yields they would uncover. Recognize that this individual has been farming all his life, (he is just a bit older than myself, if you can believe that) and is someone I would regard as in the top tier of operations, and he made a comment that is worth repeating. He pointed out that with this unusual heat both corn and beans appear to have quickly moved from a crop that was developing behind schedule to one that was ahead of schedule. The plants just began to die. While some might consider this positive as it reduces the threat of frost damage, but the point he was making was that the pre-mature death would not allow the full and natural development, and that would generally be associated with lower test weighs and quality. Think about corn test weight at 54 pounds (still No. 2 Grade) versus 59 pounds; that is an 8 ½% variance. That would be the difference between 200-bushel an acre corn and 183-bushel corn.
Here in Northern Illinois, harvest activity has been very limited so far with corn moisture rather high but I did notice several combines working in bean fields yesterday. I had driven out to Des Moines (280 miles) and back over the weekend and was slightly surprised to see little of any harvest over the first 90% of the trip and then just a limited bit of beans and silage corn but regardless of the dry conditions, I did remind myself it was still only late September. Needless to say, the limited activity means limited yield data, but that which I have heard is understandably widely variable.
We do have a few reports to work through this week beginning with the quarterly hog and pigs on Thursday and then the quarter grain stocks on Friday. The first estimate that I have seen for the grain stocks report comes from Bloomberg and expects that the Sept. 1st corn inventory to come in at 2.346 billion, beans at 339 million and wheat at 2.203.
Macros are an interesting mixed bag this morning. Gold is lower, and this after a bullish forecast from an often quoted “guru” and the dollar is strong, primarily in response to a weak Euro after one of the right-wing parties in Germany picked up parliamentary seats for the first time ever. Possibly more interesting though is the ongoing strength we are seeing in crude oil to begin the week. By no means is it a runaway but WTI has poked in another higher high and indicators suggest there is more to come. The International Energy Agency released numbers last week that indicate that consumption in the OECD nations, which encompasses 35 nations, including the United States, most of Europe as well as Japan and South Korea, has been expanding rapidly over the past three years as we have swung back toward larger, less efficient vehicles. This reversed a nearly decade-long trend (2005-2014) when high-priced fuel encouraged less use, and at the current trend, by the end of this year, we will have reversed around 62% of the cutback. With the world production capacity, there would appear to be no danger of a runaway bull market, but the pattern would reinforce the idea that higher prices are in the picture for the next few years and a rising tide in crude should help lift all the commodity boats along the way.