Evening Report | Sept. 1, 2021
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Corn, soybean hedgers: Add defensive hedges… Technicals have flipped from neutral to negative and seasonal tendencies point to additional price pressure this month. As a result, we advise corn and soybean hedgers to add short-term defensive hedges covering 10% of expected 2021-crop production in December corn and November soybean futures. This gets hedgers 50% covered on 2021-crop corn and soybean production.
Normal practice for NASS is to review this data in September for cotton, peanuts and rice. The review typically takes place in October for corn, sorghum, soybeans and sugar beets. However, the data is sufficiently complete this year to consider adjustments in September, USDA says. In October, NASS will again review acreage or corn, sorghum, soybeans and sugar beets, as well as for canola, dry edible beans and sunflowers. Regarding the possibility of making this change permanent, Lance Honig, chief of crops branch at NASS, says USDA "will evaluate whether or not to make a change moving forward at a later time."
The inclusion of the acreage review in the September Crop Production Report this year, if needed, gives the impression there is something in FSA’s initial data released in August to justify the earlier review. Our analysis of the initial FSA data suggested corn plantings could be increased around 1.2 million acres from the June estimate, which we incorporated into the Pro Farmer national corn crop estimate we released Aug. 20 after Crop Tour.
The latest data also signals a nearly 400,000-acre cut to cotton planted acreage versus USDA’s June estimate may also be warranted.
Corn for fuel use in line with expectations, signals USDA’s corn ethanol forecast will slide… USDA’s Grain Crushings and Co-Products Production Report showed the U.S. consumed 502.2 million bu. of corn during July for alcohol and other uses. Corn for fuel alcohol accounted for 449.1 million bu. of that tally, a 2.1% rise from June and a 5.9% jump from last year’s pandemic-clipped figure. That was basically in line with analysts’ expectations for 448.8 million bu. in ethanol use.
For the first 11 months of 2020-21, corn use totaled 4.615 billion bu., up from 4.446 billion at this point last season. USDA forecasts crop year use of 5.075 billion bu., signaling the August crush would have to total 459.8 million bushels. August 2021 consumption is on pace to fall well short of that total to reach the forecast. Assuming the most recent weekly ethanol production (905,000 million barrels per day the week ended Aug. 27) is indicative of the pace going forward in August, August production may come in around 415 million to 425 million bushels. Therefore, we have lowered our 2020-21 corn-for-ethanol use forecast to 5.035 billion bu., 40 million bu. below USDA’s August estimate.
Today’s report also showed the U.S. produced 1.97 MMT of distillers dried grains with solubles (DDGS) during July, which was up 2.3% from June and a 5.6% jump from year-ago.
July soy crush a bit stronger than expected… U.S. July soybean crush totaled 166.3 million bu. (4.991 short tons), which was a bit stronger than the 165.2 million bu. figure analysts polled by Reuters anticipated. The July crush was up 2.9% from June but down 9.8% from year-ago levels. The crush yielded 1.97 billion lbs. of oil, a 3.4% gain from June but a 7.0% dip from year-ago. An improvement in yield helped limit the drawdown in oil production versus year-ago levels.
The report showed soyoil stocks ended July at 2.07 billion lbs., which was 61.5 million lbs. lower than analysts expected on average, despite the slightly larger-than-expected crush. That’s a positive demand signal. Soyoil stocks fell roughly 30 million lbs. (1.4%) vs. analysts’ expectations for a similar month-to-month increase. Soyoil stocks ended July 2.5% under year-ago levels.
EPA requests remand of 31 SREs from 2018… The U.S. Environmental Protection Agency (EPA) has asked the U.S. Court of Appeals for the District of Columbia Circuit for a voluntary remand of a decision the agency made in 2019 under the Trump administration granting 31 small refinery exemptions (SREs) and denying five requests. The move follows the Supreme Court striking down a 10th Circuit Court of Appeals ruling that said small refinery exemptions must be granted consecutively. In a 6-3 decision, the court noted SREs from Renewable Fuel Standard (RFS) blending requirements do not need to be extended continuously.
“While EPA does not confess error, EPA acknowledges that a more robust analysis and explanation of its rationale for any action taken on remand would make any judicial review more efficient," the agency said in its filing. If EPA’s request is granted, it would not vacate the waivers. The agency said the remand could help it further review “what, if any, impact the remaining holdings in the 10th Circuit's decision may have on EPA's implementation of the small-refinery exemption provision generally” and on the small-refinery petitions considered in following the Supreme Court's decision.
The Renewable Fuels Association supports EPA’s reevaluation of the exemptions, but it objects to EPA’s remand request “because it is unaccompanied by vacatur or some kind of limitations on its review,” RFA President Geoff Cooper says.
StoneX pares safrinha crop estimate for Brazil… Commodity brokerage StoneX now estimates Brazil’s safrinha corn crop at 59.1 MMT, a 500,000-MT decline from its previous forecast. Looking ahead, the firm still expects Brazil’s 2021-22 soybean crop to climb to a record 143.3 MMT. StoneX also maintained its forecast for Brazil’s 2021-22 full-season corn crop to come in at 29.8 MMT. Planting of the soybean and full-season corn crops will pick up in the weeks ahead.
China stimulus ahead?... Caixin’s manufacturing purchasing managers’ index indicated that the sector was contracting for the first time since April 2020, fueling speculation that policymakers in Beijing will take steps to boost economic growth. “Investors are taking a ‘bad is good’ approach, which predicts more policy easing”, said Barclays head of European equity strategy Emmanuel Cau.
USDA’s Covid aid bucket near empty… Following a revamped Covid relief program announcement in March, USDA has committed $8.75 billion in assistance to farmers and ranchers, including $750 million for the dairy sector and up to $1 billion for contract growers of pigs and poultry. USDA Secretary Tom Vilsack announced on July 13 an estimated $50 million to livestock and poultry producers forced to cull their animals when Covid-19 outbreaks temporarily slowed or shuttered slaughterhouses.
Only a few items remain, including $700 million for biofuel producers. In mid-June, USDA earmarked $700 million for biofuel producers and said it would act in the next 60 days on “support to timber harvesters, biofuels, dairy farmers and processors, livestock farmers and contract growers of poultry, assistance for organic cost share and grants for PPE [personal protective equipment].” Contract cattle producers are also still waiting for aid.
But what about the top-up payments to hog farmers of $17 per head? That has been the subject of an intense quarrel among some in the U.S. hog sector, with a Canadian hog producer chastising the National Pork Producers Council (NPPC) for not doing enough to get the payments announced. Vilsack recently said, “We’ll target future assistance, rather than top-up or across-the-board actions that don’t account for actual losses or payments that have already been received.” Initially, USDA included a halt to the payouts via a regulatory freeze during the change in administrations.
Farm-state lawmakers periodically urged USDA to make the payments Two House Republicans said this week, “Unfortunately, USDA has given no indication on if or when these payments will be made.”
Record farmland sale for Iowa, and the bull run showing no signs of waning… Iowa recorded a new record farmland sale price last Friday of $22,600 an acre, topping the previous record by $300 an acre. The sale was on 80 acres of ground in Grundy County, Iowa. The property included a wind turbine, which helped drive up the price. Jim Rothermich, of Iowa Appraisal and Research, said, “The buyer was an investor-buyer, and the runner-up was also an investor. So, the wind turbine income stream did help the purchase price reach that high, but most of that 80 acres, or the lion’s share, was all farmland.”
Rothermich said farmland sales last week in Iowa were “amazing,” detailing, “I think there were five counties that set new price records last week. As a matter of fact, in Carroll County, which is in west-central Iowa, they set a record on Aug. 20 of $17,600 an acre and broke it just six days later with a sale of $18,300 an acre. That is how strong this market is, and it’s still moving up.” There are more buyers than sellers in the market, which along with improving farm finances are helping to fuel record land sales. Find more details.
U.S. home-price growth rose to record in June… The Case-Shiller index rose 18.6% in the year that ended in June, as robust demand continued to outpace the number of homes on the market. The tally is the highest annual rate of price growth since the index began in 1987. Home prices have skyrocketed this year, as the inventory of homes for sale remains well below typical levels and ultralow interest rates have spurred demand.
Meanwhile, the White House today unveiled steps aimed at easing the “affordable housing” supply shortage for low-income people. The changes would draw upon the administrative authority of government regulators such as the Federal Housing Finance Agency as Congress weighs broader policy changes tied to the debate over revamping U.S. infrastructure.
Big cuts, little impacts... States that ended enhanced federal unemployment benefits early have so far seen about the same jobs growth as states that continued offering the extra pandemic-related aid, according to a Wall Street Journal analysis and economists. Several rounds of federal pandemic aid boosted the amount of unemployment payments, most recently by $300 a week, and extended them for as long as 18 months. The extra benefits are set to expire nationwide next week. But 25 states ended the financial enhancement over the summer, and most of them also moved to end other pandemic-specific unemployment programs such as benefits for gig and self-employed workers. Nonfarm payrolls rose 1.33% in July from April in the 25 states that ended the benefits and 1.37% in the other 25 states and the District of Columbia.
Economists caution against concluding that expiring benefits had no impact on employment. First, they say it might be too early to detect such an effect. Second, offsetting effects from state re-openings and virus-related restrictions by local governments could be masking the impact.
Amazon is trying to crack India's agricultural market by wooing farmers… It hopes to secure the produce that yields two-thirds of the country's $1 trillion in annual retail spending. The company has begun offering real-time advice and information through a dedicated mobile app to help farmers make decisions on crops and even deploy machine learning technology. Amazon joins Reliance and Walmart in courting the sector.
