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Views and opinions: Weather is slowing corn & soy harvest across the land

 
Though last week’s USDA crop progress numbers showed corn harvest pace is close to average nationally, the state numbers showed why some feel as though the struggle is real this year.
On corn, Iowa, Kansas, Missouri, North Dakota and South Dakota are all lagging their normal pace by 5 or more percent, while soybean harvest lags as a whole on the national scale, running 6 percent under average. With cold, wet and even snowy weather hanging around for much of the week into last weekend, limited progress was expected as of Friday.
The slow harvest pace combined with potentially lower production and more on-farm storage competition has created an interesting cash market setup. It wasn’t long ago many were fearing a lack of space at harvest would cause great turmoil throughout the Corn Belt; now, many end users are scrambling to source easy-to-buy supplies.
As a result, basis levels are firming in areas with a competitive end user structure, creating opportunity for those only planning to hold their grain for a short period of time.
The Nov. 6 midterm election results were what you could call mixed, with both sides claiming victory and defeat. Many believed a so-called “blue wave” could have emboldened China, potentially allowing it to hold out on major negotiations until the after the 2020 presidential election.
However, the lack of surprising results combined with obvious support in many areas for the President’s agenda may push the Chinese to the negotiating table sooner than later. In fact, President Trump even tweeted last Wednesday morning that foreign friends had already called to congratulate him on his “big victory,” and progress would now be made when it comes to solving trade disputes.
Going into Thursday’s USDA report, many traders were not anticipating much in the way of surprises. The November supply and demand report is generally a non-event aside from some marginal adjustments made to production outlooks or demand projections.
There was some conversation ahead of the report about the updated Chinese National Statistics Board’s (CNSB) hefty revision to corn and wheat production numbers. The agency had conducted its first assessment of actual production and supply availability in 10 years, making adjustments that stretched back a decade.
CNSB claimed it had missed the production of provinces entirely and, as a result, were raising production numbers by more than 200 million metric tons (7.9 billion bushels) as a whole. Many took this information in stride, believing the USDA would maintain the numbers it had been collecting over the years.
The agency did not, instead taking the production numbers released by the Chinese government, estimating its own usage numbers and determining carryout for the country was instead 149 million metric tons (5.9 billion bushels) higher than previous estimates. By doing so, the USDA doubled its global carryout projections from a month ago, as well as trader expectations.
This significant increase in global supplies overshadowed what would have been a bullish domestic corn outlook, as production was lowered due to yield coming in 2.5 bushels to the acre lower than last month’s estimate, and 1.1 lower than trader expectations. The reduction in yield lowered overall production by 152 million bushels.
Some of the reduction in production was offset by lowered demand, with feed usage lowered by 50 million bushels and export demand reduced by 25 million. In the end domestic carryout came in at 1.736 billion, versus trader expectations of 1.773 billion and last month’s 1.813 billion-bushel estimate.
On the soybean side of things we saw production lowered as well, as the USDA reduced its yield outlook by a bushel per acre, coming in slightly below trader expectations. The reduction in yield reduced overall production by 90 million bushels from last month, but was not enough to offset the 160 million-bushel reduction in the export outlook.
Carryout came in at 955 million bushels, above pre-report expectations of 898 million and last month’s 885 million projection. If realized, carryout would now be more than 10 times larger than levels seen just five years ago.
We continue to see the USDA expect a large increase in new-crop wheat seedings, thus an increase in seed usage expectations. This increase in seed lowered carryout slightly from a month ago, bringing it in slightly below trader expectations. Chinese production levels were increased on wheat as well, but nowhere near the levels seen in corn.
Heavy snow falling across many areas with beans still waiting to be harvested and the idea we are closer to a Chinese trade resolution lent some surprising support to beans, as the week drew to a close. It is important to point out, however, when looking at the Chinese numbers, even with the increase in available supplies those bushels are not going to make it into the world pipeline.
On top of that we have actually seen the price of domestic corn bushels in the country start to move higher, something that would not match the oversupplied outlook released by the government – and when China stocks are removed from both wheat and corn on a global scale, we actually saw carryout fall for both.

Angie Setzer is the Vice President of Grain for Citizens Elevator in Charlotte, Mich. Her market commentary can be found on Twitter by @GoddessofGrain and online at www.citizenselevator.com
The opinions and views in this commentary are solely those of Angie Setzer. Data used for this commentary obtained from various sources are believed to be accurate
11/15/2018