Market Trends Commentary

 

With September in the near distance crops across the United States and Canada continue to tread their way toward harvest. It certainly has been a tumultuous production season with a very wet planting season in the east and a much more normal planting season in the western corn belt. Getting a handle on this crop size has been difficult because of the variability that came out of the spring. This uncertainty became almost institutionalized over the last eight weeks. It was partly perpetuated by published United States Department of Agriculture (USDA) numbers, which came out of the wet spring. On August 12 the USDA weighed in with their latest crop projections. 

 

The perpetual wisdom leading into the report was published corn acres were too high and that the crop in the field was much less than last year. The USDA shocked the market by pegging total U.S. domestic corn production of 13.9 billion bushels planted on 90 million acres. U.S. national yield was pegged at 169.5 bushels per acre. The market on hearing this news went down the $.25 limit on August 12. The USDA pegged soybean acres to go down to 76.7 million acres with a total production of 3.68 billion bushels. This is based on a U.S. national yield of 48.5 bushels per acre. 

 

Confusion reigned after the report because there had always been an assumption the prevent planting acres number would be incredibly large. In fact, it was with USDA pegging 11.21 million acres of corn in prevent plant and 4.35 million acres of soybeans.  Intuitively, such numbers don’t seem to add up, especially with original planting intentions. However, it has to do with the specifics of the prevent plant program and how these figures are reported and calculated by farmers. At the end of the day, the market now is trading these production numbers. Old crop corn stocks look to be 2.36 billion bushels. The new crop soybean stocks are projected to be 755 million bushels. 

 

On August 18, corn, soybeans and wheat futures were lower from the last Market Trends report. September 2019 corn futures were at $3.71 a bushel. The November 2019 soybean futures were at $8.71 a bushel. The September 2019 Chicago wheat futures closed at $4.70 a bushel. The Minneapolis September 2019 wheat futures closed at $5.02 a bushel with the September 2020 contract closing at $5.61 a bushel. 

 

The nearby oil futures as of August 18 closed at $54.87/barrel down from the nearby futures of last month of $55.63/barrel. The average price for ethanol on August 18 in the U.S. was $1.58, down from the $1.70 a U.S. gallon in the last Market Trends report.

 

The Canadian dollar noon rate on August 16 was 0.7527 U.S., slightly lower than the .7651 U.S. reported here last month. The Bank of Canada‘s lending rate remained at 1.75%.

 

 

In Ontario, rainfall has been variable across province with many areas being at a rain deficit. However, it is the nature of summer weather patterns to have intermittent thunderstorms. This means that some areas might have rain and others that are very close have none. This has meant that the already compromised crop in Ontario has become even more variable. Generally speaking, the crop in eastern Ontario looks to be about average and in parts of southwestern Ontario, the Canada Day planting dates are showing up.

 

As of August 18 most of the Ontario winter wheat has been harvested with some surprising yields. The wheat story was a very difficult one over the past eight months and producers will certainly be hoping to plant more wheat this fall. Much will depend on the lateness of this current crop and weather conditions going into September and October.

 

Basis levels for both corn and soybeans have increased in Ontario since last month. With the problems in the production fields in the Eastern corn belt these basis levels reflect the lack of supply both in old crop corn and in the prospects for new crop.  It would seem that the old crop corn basis is at its top for the moment, for both old crop and new crop basis. Going forward basis levels will likely be in flux. Will Ontario have enough corn in late September into early October? That’s an open question especially if weather goes south in the next five weeks. Ontario merchandisers can surely hope for renewed Chinese business for soybeans like last year, but with the political ramifications swirling around us, maybe that ship has sailed.

 

Old crop corn basis levels are $1.73 to $2.05 over the September 2019 corn futures on August 18th across the province. The new crop corn basis varied from $1.25 to $1.40 over the December 2019 corn futures. The old crop basis levels for soybeans range from $2.14 cents to $2.28 over the November 2019 futures. New crop soybeans range from $2.05-$2.20 over the November 2019 futures level. The GFO cash wheat prices for delivery to a terminal on August 18 were $6.71 for SWW, $6.97 for HRW, $6.64 for SRW and $6.32 for Red Spring Wheat. On August 18 the U.S. replacement price for corn was $6.22/bushel.

 

Source: GFO