- Chicago futures are sharply higher at midday with corn/soybeans leading the advance as traders accept the FSA Program Participation data as correct.
- The August FSA data would suggest a rather sizeable decline in 2020 US corn seeding of 3-5 million acres of corn and 2-3 million acres of soybeans. This has spurred bullish talk of smaller 2020 US corn/soybean crops thereby spurring fund buying and sharp rally in midday prices.
- We note that the FSA data comes on top of the crop losses due to Monday’s straight-line winds that toppled millions of acres of corn across EC Iowa. Although IA crop loss estimates vary widely, the point is that speculation is growing that the US 2020 corn crop will NOT be larger in September. This has pulled December corn futures near an open chart gap at $3.42 while November soybean futures rise above $9.00 to check out the July highs.
- The August FSA data as incomplete and impossible to correlate with past years due to processing delays created by Covid-19. Many Midwest FSA offices are still certifying acres amid limited staffing and the inability to have more than one group of producers in their offices at a time. This caused the FSA August data to potentially undercount US corn/soybean program acres.
- Chicago volume has been massive with December corn trading more than 320,000 contracts and November soybeans more than 140,000 contracts at midday. US farm cash selling has substantially stepped up on the rally.
- Chicago brokers estimate that funds have bought 38,000 contracts of corn, 14,000 contracts of soybeans, and 2,600 contracts of wheat. In soy products, funds have bought 9,000 contracts of soymeal while selling 3,000 contracts of soyoil.
- FAS announced that 110,000 my of US corn and 202,000 mt of US soybeans were sold to an unknown destination for 2020/21, while 197,000 my of US soybeans were sold to China. We calculate that China has now secured 17.6-18.0 million mt of US 2020/21 soybeans (including 1.50 million mt carried forward from old crop). Research (and the WASDE balance sheet) has China taking some 27-28 million mt of US soybeans in 2020/21.
- US weekly export sales for the week ending August 5th were; 13.5 million bu of soybeans, 36.2 million bu of corn (14.8 million in old and 21.8 million new crop), and 125.2 million bu of soybeans (20.9 million of old crop and whopping 104.3 million of new crop). The soybean sales to China were huge as they secure large amounts of US soybeans heading into the US/China weekend 6-month review. We (and many others) doubt that much will come out of the weekend teleconference with China’s active purchase pace since July helping to solidify the agreement. China wants to be a “good actor” ahead of the November 3 US election to make sure they can assess their trading risks under either President Trump or VP Biden.
- The weather forecast is slightly wetter across the Upper Midwest under a broad Western US ridge and Eastern US trough pattern holding. The mean position of the northern branch of the jet stream will be sinking southward thereby slowly return rain chances across the northern 2/3′s of the Midwest during the 9-15 day timeframe. Next week, the flow of Gulf humidity will be reduced by a NW flowing upper air pattern. However, as warmer temperatures return, so will upper air humidity allowing for thunderstorms during the last week of August. The rains are forecast to target; IA, IL, IN and OH.
- Cool temperatures will limit crop stress with highs in the 70′s and mid 80′s. Warmer readings return during the last week of August.
- FSA has tens of thousands of farmers and millions of acres that have yet to certify their 2020 program acres. It just takes time under Covid-19. We see the August FSA acres as vastly incomplete. History shows that NASS is very rarely wrong by more than 1.0 million acres from June into the final on combined US corn/soybean acres. The Chicago rally should run into strong resistance above $3.42 Dec corn and $9.05 November soybeans. This is no place to turn bullish.