September 4, 2019: Mark's Market Talk

September 4, 2019

August is now behind us and hopefully the poor grain markets will disappear as we head closer to harvest. The August 12th report is still affecting our markets, especially corn. Traders have become very protective in their positions. They may not want to believe the acre and yield numbers this report contained but that’s what they have to trade off until harvest starts. The Pro Farmer tour put some doubt in the yield numbers but they were almost within tolerance. A hot topic of discussion right now is the level of maturity for the one third of the crop that was planted late. This will continue to be a major issue until the first frost hits. The cool weather we have hade recently has slowed things down which could be a problem if we do have a September frost. A high temperature of 70 on the last day of August isn’t normal. This past week December corn lost 2 cents while November beans gained 13. Factors such as low ethanol production, poor exports, and crop size uncertainty are keeping a lid on the corn market. However, basis levels continue to be seasonally strong. Owners of old crop corn are stubborn sellers and there is some discussion that maybe the 2018 crop was overstated. As more farm storage is added getting good inventories becomes more difficult. If we hadn’t lost a billion and a half gallons of ethanol demand and the trade war was settled this corn market could be stellar right now. Meanwhile the net short corn contract number grew to almost 95,000. Earlier this summer these funds were over 150,000 contracts long. Since then we have suffered thru 2 bearish crop reports, poor trade talks, and too many ethanol waivers. On these waivers it appears the government is reluctant to do anything. But last week they announced that the USDA and the justice department was opening an investigation into the price affects after a large beef packer experienced a serious fire. Live cattle dropped almost 20.00 while retail prices shot up even though the industry quickly recovered, and cattle slaughter is back to normal. My thought is big oil money is keeping the government from fixing the same type of protectiveness the ethanol waivers are giving the oil producers. Therefore, most of us are glad to move out of August and get closer to harvest so we can start to straighten some of this out. The soybean fundamentals are still bearish but if you want to talk early frost this is the place to be. Pod counts taken by the crop tour were a lot lower than last year in many areas. But these beans were still blooming and had a long way to go due to late planting so the trade is giving these acres the benefit of the doubt that they will get to full maturity. The funds are still moderately short this market at 76,000 contracts so they aren’t trading an early frost right now. A normal frost date in these areas will lower yield. So, if forecasters start talking a mid-September frost it will get interesting real fast. Producers will need to look at all the information they can this fall to make their marketing decisions. The first impulse will be to store it all and catch the carry down the road. Basis levels may throw a monkey wrench into this theory. This may be a fall we see strong a basis during harvest especially on corn as end users struggle to keep their operations going. There is a record low amount of new crop sold at this point, so farmers have a lot of options in front of them.  
 September 1 Smith Fertilizer and Grain took over ownership of 4 locations formally owned by South Central Coop. The locations with grain facilities are Melcher, Milo, and Knoxville, which we have named Knoxville north. We also acquired the Columbia location that has an anhydrous setup and cardtrol fuel system. We have had crews working at these locations cleaning and preparing them for harvest. We plan to run all 3 grain locations this fall. It appears most of our area will have a good harvest and our goal is help our customers find a home for their crops they can’t store themselves. We are in the process of hiring people to work at these locations and hope to have most positions filled by mid-September. I encourage anyone with questions about this transition to call me at the Knoxville office 641-828-8500.   
 
Posted: 9/4/2019 12:00:00 AM by Rob Matherly | with 0 comments