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Where the margin is 2020

Where the margin is 2020
February 6-7, 2020, Moscow

IKAR in Mass and Industry Media

The Hueber Report, 13.07.18

By no means shocking, it was still a slight surprise to see crop ratings deteriorate for corn and beans quite this early on yesterday’s report. I suspect this helped shore up prices overnight and after the action yesterday, boy did we need it. Spot corn was pressed down to the lowest point traded since December of last year, and while beans did not press into lower lows per se, they did record the lowest close in nine years. Back in February, the Economic Research Service of the USDA was already predicting that net farm income in the United States was on track to record the lowest number, $59.5 billion, since 2006 in nominal terms. If we take into account that yield potential would not appear to be above average and the ongoing tariff induced price performance, one has to suspect this number continues with a negative trajectory. I am just a bit surprised someone has not uttered the “D” word to describe the farm economy, and I do not mean D-lighted.

As I mentioned previously, crop ratings did deteriorate slightly with corn in the good/excellent bracket down 1% to 77% overall and beans down 2% to 71%. Hardly a worrisome figure but as I commented, maybe just a bit early to see a setback but the crop is more advanced than average. In beans, it would appear that the excessively wet conditions are taking a toll while in corn, the extreme heat experienced in much of the growing region is creating concern. Of course, the million (or maybe billions) dollar question is “will that continue?” Both the 6 to 10 and the 8 to 14-day outlooks appear rather toasty.

There are other things going on about the world that markets seem to be paying little attention to at this point. The Russian Ag Ministry reports that grain harvest is 5% complete with overall yields around 3.82 metric tons per hectare compared with last year at 4.42 at a comparable date. The independent consultancy firm, IKAR, expects the Russian corn output to be down .5 MMT or 4%, to 12.3 MMT. In Ukraine, the Ag Ministry is projecting that overall exports for the 2017/18 crop year will be down 4.4 MMT. Last but not least, the term “El Nino” has been uttered once again as the Australian Weather Bureau predicts a 50% chance that it will return this year.

I should point out that when viewed with the combination Corn, Wheat, Bean price chart, we have really not witnessed anything that we have not already seen within the last couple years, but we are trending towards the lower end of the spectrum once again. By no means does that knowledge make any of this feel any better and for now we remain trapped wandering through the wilderness. While it has been a bit more than 40 months at this point, I have to believe for many, it feels more like 40-years. Of course, as I have pointed out many a time, markets always bottom with the news appears to be the bleakest.

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