January 07, 2019

January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see a similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs, even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections, I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

December 23, 2018

U.S. Grain Storage and Challenges to Traditional Grain Merchandising

The Farm Assets Conference in November was built around the idea of a changing supply chain for grain with end users like Anheuser-Busch & McDonald's reaching out directly to the farmer. Rabobank's Grain and Oilseeds team lays out some of the how in a report released this month. Take 15 minutes to listen to Stephen Nicholson Rabobank Senior Analyst - Grains & Oilseeds explain how he sees on-farm storage being tapped by end-users. It takes a few seconds for the clip to start playing.

Report summary via RaboResearch

The challenging profit environment for merchandising grain goes beyond the growth in U.S. on-farm storage and producer selling patterns. Both on-farm and off-farm storage has increased since the late 1990s, with off-farm or commercial storage growing faster, while silo bags on-farm provide additional room.

Major U.S. grain companies have been increasing both their control of U.S. storage capacity and the number of facilities, but still face challenges in their origination profitability. As commodity prices have fallen, so has the growth in constructed on-farm storage. Producer commodity sales patterns have not changed materially over the past twenty years, and at the same time crop production has grown faster than on-farm storage capacity, meaning that a large percentage of the crop must be stored off-farm or come to market.

Producers are changing the supply chain by controlling production, logistics, and storage –cutting the elevator out of the middle and going directly to the end-user or major origination hubs on rivers or at processing plants. Increased export competition from low-cost global producers such as Brazil and the Black Sea region pressures U.S. export commodity prices lower, which in turn pushes grain exporters' margins or elevations lower in order to compete. A potential change in the seasonality of U.S. soybean exports due to a reduction in Chinese export business will require soybeans to be stored throughout the marketing year

“The marketplace is changing how and where grain moves to market and therefore changing the grain companies’ business models,” according to Stephen Nicholson, Senior Analyst Grains & Oilseeds. “As their business models change, assets deployed will change, ownership of assets will change, and ultimately the prices paid and received will change. The changes are just only beginning.”

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