Oct 13, 20224 min read

Highlights, USDA S&D, Markets & Rain Days Update 10/13/22

Highlights

Yield Report from far west Iowa:

I’d say a good chunk of western Iowa pretty much all of the river bottom corn is subpar. I know you said you can’t seem to find any but we have a lot. Anything that is not irrigated is terrible. Our first field of dry land corn made 38 BPA. Last year the same field made 235. The field we’re currently on did 275 2 years ago. Our field average currently is 115. Our irrigated ground is very good under the water, but the corners e pretty well non-existent. Our first irrigated field under the pivot averaged 307, but the whole field average was 245 due to the corners. There’s plenty of terrible corn on the river bottom, but you get 15 miles or so into the hills and yields drastically increase.

Thanks, Andrew.

Nothing from yesterday's USDA reports changed our long term price outlook.

The USDA reduced the corn yield by six-tenths of a bushel from September to 171.9 bu. The market expected a yield of 171.8. A bit of a surprise was they reduced the 2021 corn crop by 41 million bushels. Every year, the USDA low-balls corn for feed use until the end-of-the marketing year inventory report. Every week, we see the broiler numbers compared to the previous year and the hog and cattle slaughter. Every month, we get the turkeys, cattle, and the layer hens on feed compared to a year ago. Every three months, we get the number of hogs on farms compared to a year ago.

Last month, for the marketing year ending August 31, 2022, the USDA projected fewer bushels of corn fed than the previous marketing year. And, just as the previous dozen or so years, when the marketing year end inventory is taken, there just is not enough corn, so USDA has to increase the corn for feed use. Yesterday, USDA added 115 million bushels for feed use for the 12 months ending August 31st. Almost every livestock number reported the entire year, the animal numbers were just slightly below to much above the same period a year before. With wheat $10 to $13 a bushel for six months, we knew livestock people were not feeding as much wheat as normal. Indeed, USDA cut wheat for feed use yesterday by 30 million bushels (37.5%). Corn for feed the past marketing year was 2% more than the previous year.

A low-ball number on feed use is a way to keep corn prices down during the year and when feed use is increased in October, we are in the midst of a new crop harvest and 42 days past the end of the previous marketing year… So, the bullish news has little to no impact on prices.

Now, get a load of this: the feed use for this current marketing year is projected to be 440 million fewer bushels than the last, a 7.7% decline. That is why we all need to keep an eye on livestock numbers.

Soybean yield was reduced seven-tenths of a bushel from last month to 49.8; the market expected 50.6 and that is why the report was bullish beans as the carryover was 48 million bushels less than expected. As expected, USDA increased Brazil’s bean crop by 3 million mt.

USDA reduced harvested wheat acres by a whopping 2 million to 35.5 million. We knew the production would be down 133 million bushels from the September 30 Small Grains Summary. Even though wheat for feed use was down 30 million and wheat exports down 50 million bushels from last month, the carryover was still reduced 34 million bushels.

We highly recommend you print out the attached S&D with the carryovers in bushels and, more meaningfully, in terms of days use. The US uses about 5 million bushels of wheat, 41 million bushels of corn and 12 million bushels of soybeans every day. There is a lot of valuable information on that one sheet of paper.

The Producer Price Index (PPI) is the measure of inflation at the wholesale level. Yesterday morning the PPI for September was reported at 8.5% for the 12 months ending September 30th. That was up 0.4% from August. Food inflation was 11.9%, up 1.2% from August. That means higher interest rates and that means a stronger dollar and more difficult to sell US exports. That really was the reason wheat was down yesterday despite a smaller carryout and retarded the advances in corn and beans. The next Fed meeting is Nov 1-2 with market pricing in a 75 basis point (¾%) increase as 81% probability.

Market Update

This morning:

Crude oil is at $87.89, up $0.62

The dollar index is at 113.30, down 0.02

December palm oil is at 3,666 MYR, down 70. The contract high was made April, 29th at 6,384 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.

December cotton is at $83.73, down $1.19 per cwt. The contract high was made May, 17th at $133.79 per cwt. Cotton competes with soybeans and corn for acres.

December natural gas is at $6.886, up 0.120. The contract high was made August, 23rd at $10.119. Natural gas is the primary cost to manufacture nitrogen fertilizer.

December ULSD is at $3.6083 per gallon, down 0.0133. The contract high was made June, 17th at $4.0719. ULSD stands for Ultra Low Sulfur Diesel.

December Dow Futures is at 29,324, up 63. The lifetime high is 36,832 on January 5th, 2022.