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Harvey not the Wallbanger markets feared…

by Peter McMeekin, Nidera Australia , 29 August 2017

THE ANNUAL Farm Journal crop tour of the United States (US) Midwest was conducted last week. The primary goal of the tour is to provide the industry with accurate growing season information about possible corn and soybean yields at state and regional levels during the upcoming harvest season.

Nidera Australia, Peter McMeekin

Split into two groups, east and west, scouts venture on a seven-state trek to determine yields. States sampled include Ohio, Indiana, Illinois, Iowa, Minnesota, South Dakota and Nebraska. Teams stop approximately every 20 to 30 kilometres to survey corn and soybean fields. The data-gathering methods are disciplined with the scouts receiving formal instruction before the tour commences.

The results of the crop tour have a big impact on the Pro Farmer Crop production estimates that were released after the close of US futures trade on Saturday morning, Australian time.

Pro Farmer put the US soybean crop at 4.331 billion bushels (bbu) based on a yield of 48.5 bushels per acre (b/ac). Converting to the more internationally accepted metric system, this is an average yield of 1.32 tonnes per hectare (t/ha) producing a crop of 117.9 million tonnes (Mt). Both the yield and production numbers are lower than the most recent United States Department of Agriculture (USDA) estimates, which may signal a downward review when they next report.

If this production estimate hits the bin then it would be another record for the US, surpassing last year’s 117Mt crop. Whilst there is still some way to go, the potential is certainly there, despite the dry conditions experienced in some regions over the past couple of months.

On the corn front, Pro Farmer pegged the US crop at 13.953 bbu, using a yield of 167.1 b/ac. In metric terms, this is an average yield of 4.24t/ha, and production of 354.4Mt. This equates to a yield reduction of 1.8 per cent (pc) and a total production decrease of almost 30Mt on last year’s record crop. Like soybeans, corn production also appears to be heading south, with both the yield and production figures lower than the August USDA estimates. That said, Pro Farmer has had a recent tendency to underestimate final US corn yields.

Crop conditions across the US have stabilised in recent weeks. The corn crop is rated at 62pc good to excellent. This rating is unchanged week-on-week and compares to 75pc at the same time last year. The soybean crop condition is 61pc good to excellent, against 60pc last week and 73pc last year.

US corn production may be down, but it is coming on the back of record corn crops in both Brazil and Argentina and a huge US carry-in of 2.3bbu (58.4Mt). Global feed grain demand is quite buoyant at the moment, but world stocks are also burdensome.

With enormous stocks to clear, South American exports are likely to dominate world trade in the coming months. In the absence of any significant changes to crop conditions in the major exporting nations this will put further downward pressure on the global feed grain complex.

Meanwhile, in the state of Texas, hurricane Harvey cut a swathe through the heart of the country’s major oil-producing state, crippling US Gulf ports and closing numerous refineries. This is set to significantly limit near record US oil production for at least a couple of weeks, the impact of which will be felt across domestic and international energy markets.

Whilst the effect on the agricultural sector, particularly in Texas will be substantial, it will certainly be far less than initially feared, as the intensity of the storm diminished significantly once it made landfall and the huge rainfall was limited to the Gulf states of Texas and Louisiana. On US agricultural futures markets, the recent retreat continued as damage concerns diminished.

Much of the summer crop had been harvested with the main impact on cotton bales still stored in fields following a bumper harvest. However, the biggest repercussion is likely to be on US Gulf shipments of corn and soybeans as upcountry logistics and ports struggle with the aftermath.

Source: Nidera Australia 

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