Corn and soybeans are higher early Wednesday, wheat is steady. Cattle are strong but hogs see follow through selling.
Soybeans Continue Rally on Lack of Farmer and Fund Selling
Jon Scheve with Scheve Grain says soybeans are seeing follow through buying on Wednesday as farmers are busy with a very fast harvest across the Corn Belt.
Plus, more farmers are storing soybeans this fall and waiting for an improvement in basis and/or prices with the possibility of a China trade deal.
“So, soybeans want to sit in that $10.25 range up and down a little bit each day. So I think there’s a lot of hope
that some kind of trade deal is made. And I think you have a lot of farmers who just aren’t going to sell beans at this value because they believe there is a chance that there will be a trade deal made at some point if it isn’t in the next 30 days that it’ll be in the next three months,” he explains.
Soybeans Basis Improving
The lack of farmers selling is helping to improve basis levels on soybeans in some areas according to Scheve.
“That’s going to change the basis market. It may not change the futures much, but it is going to change the basis, and you’re going to see the basis bids pop somewhat, and pop is probably 10 to 20 cents around the country. We’re starting to see that already in some processors in North Dakota, where the harvest is well past 75% done.
Trade Aid Keeping Bushels Off the Market
Scheve says the possibility of a trade aid package being announced is also keeping farmers from selling as additional cash will help them meet immediate cash needs so they don’t have to sell soybeans at lower prices, or even corn for that matter.
The funds or speculative traders have also stopped selling soybeans in case the U.S. does reach an agreement with China at the end of the month that contains soybean purchases that could rally the market.
Trade War Different Than 2018?
China has not bought any new crop soybeans from the U.S. yet as leverage in trade discussions but how is that different than 2018?
Scheve says the USDA has already lowered export estimates for the coming year to account for it. Current projections are for a level that is nearly the lowest in 11 years.
Comparing carryout and/or the stocks to use ratio from the last 11 years he says carryout is significantly lower now than during the first trade war.
“So, this year’s situation seems to be completely different and may not be as bad as it seems and why the lack of Chinese purchases isn’t going to hurt as much as some worry it could,” he explains.
Big Question is What Are Final Soybean Yields?
The USDA is forecasting 2 bushels above the trend. August weather is critical to bean yields, and the eastern soybean belt was very dry through August says Scheve.
Scheve says early field reports are suggesting excellent yields, even in the driest parts of the U.S. Even if soybean yields are reduced by 1–1.5 bushels per acre, carryout would remain tight as long as the current export estimate is met.
“Ohio, where it was incredibly dry. I talked to numerous producers over there and they all shared that I was expecting,
you know, fields that should do 65 as an average, I was expecting them to come in at 55 and they’re coming in anywhere from 64 to 68. And I’m like, wait, you’re producing nearly average yields. And they’re like, yeah. And to me, that just says that, wait, there might not be a bad spot overall in the country for beans,” he adds.
Are Corn Yields Dropping?
While Scheve thinks national corn yield is dropping, it may not be as much as expected.
“The yields that I’m hearing in the Dakotas, they are coming in, the early yields coming in are substantially above normal. I mean, we’re looking at yields up there should normally be 150 to 175. They’re running 175 to 210, so they’re significantly above normal. The Ohio crop, the corn is coming in surprisingly better than we expected. It’s nearly average. Southern Indiana, we talked to people there, they’re still coming in at or slightly above average. So Central Illinois, a little bit the same way, it seems to be right at average, maybe slightly above. It doesn’t seem like there’s any problem areas out there,” he says.
Still a Problem With Old Crop Corn
Further complicating that is the amount of old crop corn that is still in storage on farm that is not accounted for by USDA according to Scheve.
He contends there was a substantial amount of old crop corn in bags that USDA has no way to identify with their methodology in the Quarterly Stocks Report.
“How do we know how many bags were used? We know maybe how many were manufactured if there was a way to talk to every manufacturer, but I’ve got farmers that have had three bags sitting in their shed for a number of years just in case they need to use them but they’ve never used them. I’ve also heard of some farmers that are filling bags with low crop corn in the middle of harvest just so their neighbors don’t know that they’re doing that. And to me, that just says, “Hey, there’s a lot of corn still out in the country.”
Markets Strategy is to Store
Scheve says not only are more farmers storing on farm this year, the market is telling them to do that.
With the carry in the futures market and the poor basis levels he is recommending farmers try to store and hold out for better prices or basis levels.
However, he cautions that commercial storage is expensive, so on farm storage is still the best if farmers have the room.
