The Commstock Report

Grain Exports Have to Improve From Here   Export demand has to pick up considerably from here if grain prices are going to have a chance at finding their seasonal lows anytime soon. This week featured another widely disappointing export sales report with new commitments for corn, soybeans, and wheat all near the bottom end of expectations.  Looking at the factors for why exports have been so sluggish, it is also possible to see the reasons for believing that trade demand will flip more bullish over the coming several months.   First, to see just how bad it has been, compare new-crop export sales with where they were at this point a year ago. Even after more than two months of daily export sales announcements popping up regularly, soybean commitments are down 34 percent from a year ago while the USDA’s projection for the marketing year pegs them lower by 10 percent. Wheat sales are down 17 percent from last year versus the government forecast for them to drop about 8 percent. Cumulative corn sales are relatively better off being down only 6 percent from last year, but USDA sees corn exports rising 26 percent this year.   The most…

SPECIAL HARVEST TIME REQUEST: Thanks to a host of you who have already emailed us yield results with some helpful photos that show what you’re describing. We’re collecting early yield data in a more systematic and meaningful way than random hearsay. We’re asking you to email us early yield results for corn and/or beans to report@commstock.com with the following data points: Your actual yield Your APH yield Whether your yield “met”, “fell short” or “beat” your expectations Your county and state As we tabulate results from this voluntary client survey, we’ll get a better “feel” for what to expect in USDA’s October WASDE. The more of you who participate, the more valuable our survey results may prove! Thank you in advance for participating! (Some telling photographs would also be most welcome! (YOU”LL SEE A SAMPLE IN “OTHER AG HEADLINES AND HOTLINES” BELOW.) SOYBEAN MEAL COVERAGE RECCO DAY 2: Use recent break to hedge 50% of 1st qtr. SBM needs in March ’24 futures. On the Grains: Grains are firm in overnight trade as we go to press. Yesterday’s action was brutal when it started off with very disappointing export sales. At only 567,000 tonnes, corn sales barely made the low end of expectations that ranged from 550K to…

The debate over CO2 carbon sequestration pipelines includes a re-evaluation of eminent domain law. This is the just of how it works. Some entities plan to build something that requires use of or crossing private property. That can be the state building a highway, city an airport or utility building power lines or pipelines. In the state of Iowa, the entity wishing to acquire an easement must seek a private agreement with the landowner and go through a regulatory process. The companies seeking the easements are required to get as many voluntary easements as possible and then the IUB decides on whether granting them eminent domain power to secure the rest is warranted. There is no statutory number of voluntary easements required but precedent set from the Dakota Access pipeline suggests that 75% of easements must be voluntary to gain IUB approval. The Rock Island powerline only secured 18% voluntary easements and was denied IUB approval. That is the benchmark that we have to work with. Summit Carbon Solutions has near 75% voluntary easements to give them a shot at gaining IUB approval. While that appears to suggest that 25% oppose the pipeline, there is a substantial number of landowners…

SPECIAL HARVEST TIME REQUEST: We’d like to collect early yield data in a more systematic and meaningful way than random hearsay. We’re asking you to email us early yield results for corn and/or beans to report@commstock.com with the following data points: Your actual yield Your APH yield Whether your yield “met”, “fell short” or “beat” your expectations Your county and state As we tabulate results from this voluntary client survey, we’ll get a better “feel” for what to expect in USDA’s October WASDE. The more of you who participate, the more valuable our survey results may prove! Thank you in advance for participating! (Some telling photographs would also be most welcome!) SOYBEAN MEAL COVERAGE RECCO DAY 1: Due to possible bottoming action, hedge 50% of 1st qtr. SBM needs in March ’24 futures. On the Grains: Grains are weak in overnight trade with soybeans down hardest. Monthly trade data for August showing China’s purchases from Brazil were up 45% while August U.S. sales to China were down by 58% was the “headline” driver, even though U.S. sales to China year-to-date are actually up by 14%. We get a new batch of weekly export sales at 7:30 that could set the tone for morning trade. The range of expectations…

Typically, trade is one of the issues debated during the presidential primary season here in Iowa but trade, free or otherwise, is not on anyone’s front burner this time. Topics to do with “wokeness”, which is essentially a backlash from the right against expanding diversity, have been elevated to the status of something significant. The trade issue that does get discussed has more to do with national security rather than commerce. The previous president was highly focused on trade, globally, but mostly focused on China. We are now collecting $Blns in tariffs from China and though a trade deal was made with China, where they were supposed to buy $200 bln in US products, it has never been mentioned in current context let alone gotten enforced. Farmers lost out on what was promised. The agreement intended for China to buy more US purchases but in the end, they have not bought enough to even reach the import levels from prior to the trade war. There was an assumption that China would favor the purchase of US Ag products in order to better balance our trade and that notion was quickly dispelled. Chinese commercial interests buy from where and from whom…

On the Grains: Corn and soybeans are steady in overnight trade while wheat is firm again after yesterday’s higher close. We’re keeping an eye on basis as harvest picks up momentum and yesterday the national average corn basis slipped but a penny and the soybean basis unchanged. I talked about ethanol margins being the highest since Dec. of ’21 on Monday and crush margins for beans are solid as well with the value of a bushel of beans in meal and oil at 16.39 yesterday. The Fed meets today and everybody expects them to hold rates steady, but carefully warning the fight against inflation isn’t over and refusing to rule out further hikes if it heats up. That’s obligatory caution talk. There are two more Fed meetings this year but a growing consensus expects no further hikes until they begin cutting rates by mid-2024. The crude oil market action feeds into slowing inflation. There’s been a steep rally but it ran out of gas (pun intended) yesterday when it collided with weekly chart resistance at last fall’s highs. It’s also overbought and due for a correction down to the uptrend line, which should hold. Overnight strength in wheat after yesterday’s…

“I know some of you would be like, I get It, but remember we are in the midst of the greatest reindustrialization process in the United States history.  We are building out industrial infrastructure and factories and refineries and pipelines and roads and all that faster than we did during WWII.  There’s a lot of things in play here so let me start with kind of the legacy factors and then we will go into the issues of the now.   1st the legacies.  The United States has the most highly skilled labor force in the world by a significant margin.  There are a few countries like Singapore where the overall education level might be higher but you know Singapore is a country of 5 million people.  The United States is a country of 332 million.  You could say the Germans or the French which might have a little bit more productivity per hour than the United States.  You know we’re talking about a labor force in the United States that is 4 or 5 or 6 times as much and that means that there is not a lot that the US can’t do if it puts its mind to…

On the Grains: Overnight markets are soft again as harvest picks up steam and basis softens. Yesterday the national average basis for corn and soybeans declined by 3 and 4 cents, respectively. After yesterday’s close the weekly crop condition ratings from NASS didn’t decline any more than expected Premiums for spot delivery over post-Oct. 1 “new crop” delivery are rapidly disappearing. World leaders are gathering in New York this week, the UN’s biggest conclave of the year to discuss issues ranging from collective efforts to thwart climate change to the war in Ukraine. That topic has Ag market implications. Ukraine’s President Zelenskyy will address the gathering in person this year rather than remotely, as last year. President Putin of Russia and Xi of China will be conspicuous by their absence. Biden is set to speak this morning with the only guidance on what he’ll say from White House National Security advisor Jake Sullivan summed up as “using American leadership to solve the world’s problems” without further comment on which problems will be included. Of note, Sullivan also said that “on the sidelines” of the General Assembly, Biden will join the presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan in the…

Harvest has begun here. The earliest planted corn on light ground was combined to get an early harvest premium at the ethanol plant. The family intends to start the earlage harvest next Monday. I expect there will be an early soybean field missing here soon as well. While cool temps and some moisture may have stabilized the deteriorating soybean condition none of the crops will be adding bushels. My partner says that the top clusters are missing and is worried about small beans. We were expecting 68-73 bpa and now we have revised that lower to 58-63 bpa. When both yield and price go lower the impact on gross revenue is sobering. We think USDA at 50.1 bpa is still too high. Hope that we are too pessimistic but it was an unfavorable end to the growing season that should negatively impact soybeans most. I am binning our soybeans in the hope that sometime the soybean market better reflects reality. We hope that the weak soybean market doesn’t know something that we don’t. Both corn and soybeans will have extreme yield variability driven by the luck of rain, soil type and planting dates. While my silage appraisal was 261 bpa…

FALL FERTILIZER RECCO DAY 3: The months of down-trending fertilizer prices appear to have bottomed out. Per last Thursday’s Weekly Retail Fertilizer Update price fall fertilizer needs now if you haven’t already. On the Grains: Corn and soybeans are steady in overnight trade despite early harvest picking up pace through the weekend. Wheat is weaker. Part of the weakness we saw in corn and beans Friday was likely what’s termed “pre-hedging pressure” as cash merchandisers take short positions against what they anticipate purchasing from farmers through the weekend and can’t risk doing so unhedged. Steady overnight prices thus far shows they adequately anticipated what they bought. The light overnight pressure also shows bears weren’t much emboldened by Friday’s COT report showing funds added heavily to their net short position in corn. They sold nearly 41,000 more contracts through last Tuesday, taking their net short total to just shy of 135,000. Similarly, funds lightened up their net long position in soybeans by nearly 9,000 contracts yet remained net long just under 74,000. Expectation of traditional “harvest pressure” can be read into the fund action on both counts. We continue to suspect this harvest pressure may prove lighter than anticipated for two reasons….