Weekly Market Recap and Tom's Take, August 21, 2020

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September corn futures gained 2 1/2 today, ending at $3.27, up 2 1/2 from last Friday’s close. December corn gained 1 1/4 closing at $3.40 1/2, and was also up 2 1/2 from where we left off last week.

November soybeans lost 1/2 cent today to finish at $9.04 3/4, up 6 cents week-on-week. January beans also lost 1/2 cent today and finished at $9.11 1/4, gaining 7 1/2 for the week.

The BIG story of the week was the Pro Farmer Crop Tour wrapping up. For corn, they are calling the National yield 177.5 Bu./acre, with Iowa at 180, Indiana at 186, Nebraska at 188, Minnesota at 199 and Illinois at 205. Even with South Dakota at 164, they are saying it’s the best corn crop they have ever seen. Their overall production number is just under 15 billion bushels at 14.8 with a 1% +/- variation noted, giving a range of 14.67 to 14.96 billion bushels. They cut 500,000 from harvested acres, with 300,000 of those in Iowa.

For soybeans, they expect a national yield of 52.5 bu./acre, and production of 4.362 billion bushels with a 2% +/- variation, in a range from 4.275 to 4.449 billion bushels. For Iowa, they estimate a yield of 55 bu./acre and also say that the crop desperately needs rain in the next 10 days - stating the Derecho winds depleted soil moistures, they note a 46% decrease from last year. Looking at yields for other states show Illinois at 62 bu./acre, Nebraska at 59, Minnesota, and South Dakota both at 51, with both expected to produce a record crop for their state this year. Indiana is pegged at 61 bu./acre. Both of these National yield numbers, 177.5 for corn and 52.5 for beans would be a record.

For more information on items impacting corn and soybean values, check out our free weekly podcast, the Bull Bear Banter: https://landusexperience.podbean.com/

TOM’S TAKE:

I’ve read a couple of conflicting stories on China lately. The first one is centered on a new initiative by President Xi Jinping to tackle the “shocking and distressing” problem of discarded leftovers. This has been labeled the “Clean Plates” campaign and is aimed at the 35 million tons of food that is discarded every year. The main message from this story was that there is a growing concern about adequate supplies of food. 

Then there are stories about increased demand by China for agricultural products - but mostly for ingredients for feed, as they work to rebuild their hog herd. The item with the highest demand for the Chinese palate is pork. They have steadily increased their consumption of pork through the years until African Swine Fever tore through the country over the last couple of years. The main message here was about ensuring a healthy hog herd in order to meet this high demand for pork. 

I wonder if these two stories are somehow related. Remember, a few months ago, there was a story circulating that said some, if not most, of the issue with ASF was table scraps being fed to back yard hogs. In effect, these pigs were eating discarded pork among other things. The speculation then was that it would be difficult for China to move to a complete westernized model of pork production because of all of these backyard pigs. Perhaps, they are forcing people to eliminate food waste in an attempt to get them to use “feed” for their hogs instead of table scraps. Let’s take that a step further, “IF” the Chinese government is serious about rebuilding a healthy hog herd, and eliminating table scraps as a source of feed for the majority of its’ hog herd, then it’s possible that they will need more soybean meal, corn, DDG’s and yes, wheat to feed these animals. 

I am not usually a person given to HOPE when it comes to the grain markets, but if we do indeed see a significant uptick in demand for feed from China, whether it comes from the U.S. or not, it will shrink some of these burdensome world inventories, and push prices a little higher. So, let’s continue to HOPE that they are successful in their efforts. Now I’ll also say, that Chinese buyers are not known for making rash purchasing decisions. They will be shrewd and try to keep their feed prices as low as possible. But maybe, just maybe, we’ll see some benefits from all of this. 

Agree? Disagree? Let me know: Tom.Guinan@LandusCooperative.com

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