Welch on Grain: Corn Exports Surpass USDA Projections; Sorghum Still Lagging

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    Market Situation

    Crop Progress. The crop condition index for U.S. corn held steady this week at 361. The average index rating for late August is 358. After tracking just below average for most of year, the index has been equal to or above average the last three weeks.

    The list of major corn producing states with double digit ratings of poor and very poor held at 8 this week (% change from last week): Illinois, 14% (+0%), Indiana, 18% (+1%); Iowa, 12% (+0%), Kansas, 16% (+2%), Michigan, 13% (+1%), Nebraska, 13% (+0%); North Dakota, 18% (+1%), and South Dakota, 24% (-3%).

    Grain Use. Broiler chick placements in the 2016/17 corn marketing year were up 2% compared to last year and up 4% over the most recent five-year average. Of the 97.640 million grain consuming animal units estimated by USDA for 2017, 32.356 million of those are poultry, an all-time record high.

    Corn export sales commitments for the week of August 24 were 7 million bushels. This pushed the total for the marketing year to 2.235 billion bushels, just above USDA’s target for the year of 2.225 billion.

    Grain sorghum exports for the 2016/17 marketing year jumped by 11 million bushels in the week of August 24. This brings sales commitments for the year up to 90% of the marketing year target of 225 million bushels.

    U.S. ethanol production for the 2016/17 corn marketing year is up 4% compared to last year and 12% above the most recent 5-year average. The implied bushels needed to produce this amount of fuel is 5.575 million bushels, 15 million bushels higher than the combined corn for fuel and sorghum food, seed, and industrial use totals in the August WASDE.

    Outside Markets. The revised estimate of U.S. second quarter GDP was released by the Commerce Department on Wednesday. GDP growth was estimated at 3.0%, up from a preliminary estimate of 2.6%. Gains were noted in consumer spending (+14.7 billion), business investment (+11.4 billion), and exports (+1.5 billion); government spending decreased relative to the previous estimate (-7.3 billion).

    The August jobs report released this morning showed the U.S. economy added 156,000 jobs last month, down from 189,000 in July. The unemployment rate was little changed at 4.4% as the size of the labor force grew, but the unemployed number increased and employed went down.

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    A broader measure of unemployment, U6, which accounts for persons with part-time work but are seeking full-time positions, was unchanged at 8.6%. The labor participation rate was also steady at 62.9%. In addition, revisions to June and July lowered job increase numbers by 41,000 from what was previously reported. Average job growth the last six months is 160,000.

    Marketing Strategies

    Seasonality. The seasonal price pattern for the December corn contract shows that prices tend to fall off after we know more about acres (June 30 Acreage report) and weather during the precipitation and temperature sensitive silking and tasseling stages (July).

    With dry conditions impacting major corn growing areas, yield concerns have propped up prices more so than we would see in a normal year, compounded by significantly fewer corn acres this year. But recent price movement has been in line with seasonal expectations.

    2017 Feed Grain Marketing Plan. I am 80% sold on the 2017 corn crop and will price the remaining 20% at harvest. I am turning my attention to the December 2018 contract and am prepared to make sales against next year’s crop if we get a significant late season rally.

    Upcoming Reports/Events
    September 12 – Crop Production and WASDE
    September 29 – Small Grains Summary




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