Grain and livestock futures were mostly lower early Wednesday.
Corn Sees Profit Taking
Rich Nelson Chief Strategist with Allendale, Inc. says corn saw pressure from profit taking after getting overbought.
Crop ratings were at 69% good to excellent on Tuesday, down 2%, but still historically high for this time of year.
He says, “Very important for us to note crop ratings in fact right now are the best in nine years for this specific week and since the entire data series started in 1986 this is the fourth best rating for this week so these are still implying from a rating standpoint strong yields.”
Allendale Projects Record Corn Yield
Allendale’s annual yield estimates also indicated a record yield on corn at 187.52 bu. per acre, which would also result in record production of 16.631 billion bu.
Nelson says that implies USDA will not be coming down on their yield estimate in the September WASDE report, even though the crop is starting to suffer from disease pressure like Southern Rust and Tar Spot.
“So we did see some some light yield declines from USDA’s point of view for much the Eastern Corn Belt, our numbers for Missouri also showed a decline as well from USDA’s view, but that was more or less much of it was offset with the raised numbers we saw here from much of the Western Corn Belt. So despite the fact we have heard some disease pressure and many other issues, we’re not quite seeing that show up in the overall farmer survey numbers,” he explains.
Allendale Projects Record Soybean Yield
Allendale’s soybean yield estimate was also a record at 53.28 billion bu. which translates to a 4.268 billion bu. crop.
This is very close to USDA’s August estimate and Nelson again says any yield loss from disease, flash drought in the Eastern Corn Belt or frost damage, may not show up until much later in the season.
“For our our yield survey this would imply USDA is probably not going to make any major adjustments for this upcoming report here in a week and a half. What I would suggest is maybe they’ll do something like last year where we did raise yields actually into the October report, then drop them. So I would say that our survey suggested we’re not
going to see that drop in production for this specific report, maybe a month, maybe two months time here.”
Soybean Demand a Problem
The bigger problem for the soybean market is even if the crop ends up being smaller it may not offset the lower demand that is starting to materialize with China out of the soybean export market.
He says if China does not buy or comes into the export market late that could take their purchases from 22 MMT last year down to only 10 MMT this marketing year, which is equivalent to 400 million bu. of lost demand.
The Federal Appeals Court ruling on tariffs and the summit between China, India, Brazil and Russia on U.S. tariffs are both working in China’s favor and indicate they may not strike a deal with the U.S. in time to help the soybean market.
Wheat Futures Struggle Despite Strong Exports
Wheat futures continue to struggle despite strong export demand.
Nelson says with larger crops in Australia, Russia and Argentina there are ample supplies in the world.
Plus, the low price of corn suggests wheat prices need to fall farther to work into the feed ration.
Cattle Futures Correct
Cattle futures were correcting early Wednesday but is it routine profit taking or is a bigger correction starting?
Nelson says cash trade looks like it could be steady this week which should hold the futures in line.
However, after three weeks of light slaughter the packers may be ramping up the kill, which could hold futures back.
Lean Hogs Consolidate Off New Highs
Lean hog futures were also lower on Wednesday with cattle and seeing some profit taking after making new highs on Wednesday.
