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Closing Comments



Closing Comments


USDA reports that 82% of the U.S. corn crop was in the dent stage as of September 14, up from 69% the previous week, but down from the five-year average for the week of 85%. Furthermore, 27% of the crop had reached maturity by September 14, up from 15% the previous week, but down from the five-year average for the week of 39%.

The percent in dent stage as of September 14 in key northern states stood at 83% in Iowa, 60% in Michigan, 81% in Minnesota, 88% in Nebraska, 59% in North Dakota, 80% in South Dakota and 59% in Wisconsin. Harvest progress was listed at 4% nationally, which is down from the five-year average for the week of 9%.

The crop rated a condition index score of 387 (500=perfect crop) for the third week in a row. That compares to an index in this same week last year of 342 and the 10-year average for the week of 347. In fact, it was the highest corn condition index score for this point in the season since 1994. Crop scores were unchanged on the week in Illinois, Iowa, Texas and Wisconsin; they were modestly lower in Colorado, Michigan, Minnesota, North Carolina and North Dakota and modestly higher in all other states.

My corn yield model dropped 0.1 bushel to 172.9 bushels per acre as a result. I still believe that this year’s crop will end up north of 176 bushels per acre at the end of the day. Harvest yield results should be a big factor in setting the tone going into USDA’s October 10 crop report. Looking back at the analog years of 1994, 2004 and 2009, we find that USDA yield increases in it October report in those years was 4.8, 9.0 and 2.3 bushels per acre respectively.

USDA-FSA released its September totals for certified acres to this point. The August numbers raised a lot of chatter that this year’s planted acres may be well short of those reported by USDA-NASS in its official monthly crop reports. As such, that raised a lot of talk about the September report, which would include additional data.

The data indicated that total certified planted and failed corn acreage as of the September report came to 84.8 million acres. This is not an estimated of total planted acreage, but rather of what has been certified to this point. USDA-FSA will update the data again on October 15.

The data would appear at first glance to say that USDA-NASS is 3 to 4 million acres too high for planted corn area, but I don’t believe that is the case, and the market doesn’t either. Some FSA offices have indicated that they were spending more time on other programs and not focused on getting the certified acreage entered. There’s also been a tendency for fewer farmers to certify their acreage in recent years. I’m not talking about a 20 or 30% drop in farmers certifying, but just a 1 to 2% decline makes a big difference in the FSA data.

In the end, traders chose to set aside the FSA data to focus on big yield reports. It’s been my contention this fall that high yields would trump FSA acreage data, and that’s what we’ve seen play out since the data release.

December corn firmed late in the day as the dollar came off its gains, posting fractional gains on the day. First significant support is at the double-bottom of $3.3575, with resistance at today’s high of $3.505. The path of least resistance longer-term would still appear to be lower, but this market may need to consolidate a bit more before it’s ready to go the next leg lower.


USDA reports that 24% of the U.S. soybean crop was dropping leaves as of September 14, which was twice the previous week’s pace, but still down from the five-year average pace for the week of 32%. Progress in key northern states was listed at 13% for Iowa, 22% in Michigan, 12% in Minnesota, 25% in Nebraska, 37% in North Dakota, 28% in South Dakota and 11% in Wisconsin.

That’s critical, because it represented progress during the weekend in which the crop faced its first legitimate frost threat. Some soybeans were frosted, especially the top leaves, but crops with poor canopy saw more damage in areas where cool air pooled. However, the USDA data would suggest that the impact on the overall U.S. crop was not that great when compared to high yields elsewhere.

USDA’s data suggests that the crop rated a condition index score of 384, unchanged on the week, but up from 336 the previous year, up from the 10-year average for the week of 347 and the highest rating for this point in the season since 1994. My soybean yield model went up 0.1 bushel to 48.4 bushels per acre as a result of the USDA data.

That seems very high, but yield reports thus far would suggest that we could actually see it verify. A look back at the analog years of 1994, 2004 and 2009 finds that USDA increased its yield estimate in its October report by 2.3, 3.5 and 0.1 bushels per acre respectively in those years.

This week’s crop ratings were unchanged overall, but there were differences from state to state, some of it reflective of frost damage. Condition scores were unchanged in Indiana and Ohio, modestly lower in Illinois, Louisiana, Minnesota, Mississippi, Missouri, Tennessee and Wisconsin, while modestly higher in all other producing states.

USDA-FSA reported that farmers have thus far certified 80.8 million acres of planted and failed soybean acres. Again, the casual observer might say that USDA’s soybean acreage estimates are 2 to 3 million acres too high. However, the same arguments apply here as I outline in the corn comments above. There are significant reasons to question whether the FSA data provides an accurate picture of total soybean acreage, with yields impressing from the harvest thus far. As such, big yields are trumping acreage data.

Big gains in soyoil Monday disappeared today, pulling the rug out from under the soybean market once again. The lead November contract dropped to double-digit lows, before firming off those lows with the U.S. dollar. The oilseed still finished the day in the bottom third of the day’s trading range. It may have firmed off its low and held above contract lows, but today’s settlement price was the lowest to date for the November contract in this harvest season.


USDA reported Monday afternoon that spring wheat harvest advanced to 74% as of September 14, up from 58% the previous week, but down from the five-year average for the week of 86%. Progress in key production states was at 95% in Idaho, 74% in Minnesota, 73% in Montana, 65% in North Dakota, 94% in South Dakota and completed in Washington.

Winter wheat planting progress reached 12% as of September 14, up from 3% the previous week and up from the 5-year average for the week of 11%. Progress in key states stood at 5% in Kansas, 26% in Nebraska, 14% in Oklahoma and South Dakota and 8% in Texas.

Egypt is known for releasing snap tenders to buy wheat on days when wheat has made a sharp drop in price. It did so again late Monday, with the results released this morning. U.S. wheat was not expected to be competitive, considering our freight disadvantage relative to Europe and the Black Sea. In the end, Egypt bought 6.6 million bushels of French wheat for mid-October delivery.

Wheat futures dropped to new contract lows in all three markets once again today. U.S. wheat was offered in the Egyptian tender, but again was not competitive. Traders love a good trend and they see no reason to break the current one yet, which unfortunately is lower.


This week’s bearish tone in the live cattle market continues. The packer is believed to have control over a greater number of cattle, reducing the number that they need to bid on to fill their needs. Packer margins are estimated at $45 losses per head, further removing their incentive to be aggressive, although they want to hang onto market share. The product market has also lacked the price strength seen earlier this summer.

In the end, supplies are still tight and will remain that way for quite some time. However, traders are worried about the beef market’s ability to be competitive as we head into October, which is National Pork Month.

Meanwhile, the cash feeder cattle market remains red hot, with rains in the Plains making wheat pasture more likely and big corn yields suggesting lower feed prices down the road. The latest CME cash index came in at a record $230.04, up $2.30 on the day. It was the fifth consecutive trading day with a new record high and the 12th trading day in a row with a higher index, with gains over that period totaling $12.69 per cwt. As a result, the feeder cattle futures market had a bit more strength in it than did the fat cattle market.

Boxed beef movement dropped to 148 loads Monday, down from 174 loads on Friday and down from 155 loads the previous week. Choice cuts were down $0.91 to $249.02, while Select cuts were down $1.26 to $233.28 per cwt. That pushed the Choice/Select spread to another 9-month high of $15.74 per cwt, up from $13.55 the previous week. Movement at mid-morning today was at just 82 loads, with product prices mixed.


The pork complex continues to struggle to find value ahead of USDA’s September 26 quarterly hogs and pigs report. The rebound in the cash market has under-performed expectations, necessitating that the futures market pull back. Traders hope that USDA’s data will provide greater clarity on the size of the anticipated hole in supplies this fall.

Today’s cash market was again mostly steady, with some locations up to $1 higher. The latest CME 2-day lean hog index was up $0.92 on the day to $102.26 per cwt. The index has been up on each of the past 7 trading days, after being down the previous 7 weeks. Gains over that 7-day period total $6.81 per cwt.

Product movement eased to 256 loads Monday, down from 259 the previous day and down from 276 the previous week. The composite pork product price jumped $2.28 to $108.85 per cwt. The composite price has been higher in 10 of the past 14 trading days. Movement at midday today was again good at 214 loads, with the composite price at $109.11 per cwt, up another $0.26 on the day.

October lean hogs are trading a range largely between $104.50 and $108 per cwt while it waits for the cash market to catch up. Meanwhile, the December contract continues to pull back ahead of the USDA report, with next support near $93.

Closing Market Snapshot


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.




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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org


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