Mid Week Comments

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The Bull is Sprinting!!! - 9/15/20

Grains continue their uptrend, with new 2.3 year highs in soybeans again
yesterday, penetrating the $10 area for the first time in over 2 years.
There is much to be excited about in soybeans, as USDA botched yield
estimates again this year, hiking it to 53.3 bu in August only to have to
start the backoff in yield in Friday's September 11 report to 51.9 bu.
They still are ridiculously high as the Pro Ag yield model yesterday
dropped to 49.9 bu (down 0.11 bu last week) which is a full 2 bu (165 MB)
below the current estimates. USDA cut carryout in Sept. from 610 to 460,
down 150 mb or 25% already in one report - so the government must have
decided that was enough - or prices might go up!!! Therefore, prices
keep going up.

The simple truth now is that USDA is still 2 bu/acre too high in soybean
yield (and yield is dropping every week), which is 165 mb MORE USDA needs
to cut from the 460 mb number, which takes us to 295 mb (below 300 mb) -
down another 33% in ending stocks and the tightest in years! Also, USDA
is too low in exports as the US is selling soybeans like crazy to China
(maybe another 50 mb cut???). So its becoming much more interesting in
soybeans with an election coming. Ironically, no matter who is elected
President, its likely the Ag outlook improves as Biden will lick China's
boots if elected, and Trump will hold them to the fire - or even more
tariffs will go on. Either way, the best thing China can do is buy lots
of US soybeans (and corn and wheat), which will allow them to sell us 500
billion in goods (while buying maybe one tenth that in Ag goods). Even
Biden/Dem's know that the tariffs are working for America, and our
previous fear of China was unfounded (but they did hurt farmers for
awhile). Countering that damage was Trump funneling tariff money to
farmers in the 2 year interim - and preventing catastrophe.

Crop progress yesterday showed corn harvest at 5% (equal to normal), 89%
dented (7% ahead), and 41% mature (9% ahead). Corn conditions dropped 1%
to 60% G/E, dropping the Pro Ag corn yield model 0.8 bu to 176.7 bu,
still below USDA at 178.5, and just slightly above 'trend' 175.4 bu. So
USDA needs to cut another 2 bu/acre, or about 165 mb which would further
lower carryout. Its likely heat will cut that yield in southern states
even more by harvest completion as typically hot years like 2020 are not
good yielding years in the southern corn belt. Since Aug. 10, our yield
model is down almost 5 bu/acre - and it could continue to drop into
October as "lie detectors" (in other words, combines) are released into
more fields.

Soybean conditions were down 2% to 63% G/E, dropping yield to 49.9 bu as
37% are dropping leaves (6% ahead of normal). HRS wheat is 92% harvested
(equal to normal), while barley is 95% harvested (1% ahead of normal).
Winter wheat is 10% planted, 2% ahead of normal.

Weather forecasts are calling for virtually no rain in the US the next
week (except for Hurricane Sally rain in AL), and then next week very
little precip as well (below normal), with only LA, ARK, MO, ILL, and WI
getting any significant rain at all.

We are hitting price levels which once again one could make sales at -
finally! Patience was a virtue, as we have 2.3 crop years of soybeans to
market (including the 2020 crop) as we made no sales of soybeans during
this time when prices were so pathetic. Note that ANY SALE the past 2.3
years was a bad one compared to today's higher prices - and fortunately
we didn't make any of those in soybeans. In fact, the only significant
sales we made were last year in corn, where we sold about 120% of a crop
in the May/June19 rally to $4.60, with most sales at $4.25 and higher.
Now the difficult decision to be made is, "How long do you hold, and for
what price?"

Its clear that soybeans are the best sale opportunity right now, with
winter wheat a close second but prices have a way to go to call them
"good" prices. They just seem 'good' now because we just came through
perhaps the worst 2 year period in decades. With multi-year technical
bottoms in place on all major grains, it will be a lot more fun marketing
the next 2 years.


Ray can be reached at raygrabanski@progressiveag.com.
+++++++++++++++++++++++++++++++++++++++++++++++++++
Ray is President of Progressive Ag Marketing, Inc., a top Ranked
marketing firm in the country. See http://www.progressiveag.com for
rankings and link to data from Top Producer Magazine and Agweb.com.

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