Today s Newsletter Market Situation Crop Progress 1 Grain Use 4 Outside Markets 5 Marketing Strategies Seasonality 9 Market Situation Crop Progress. The corn crop condition index for June 25 (crop week #25) dropped two points to 390. The percentage of corn rated poor increased by one and the percentage rated good declined by one. The average index score for this week of the growing season is 372. 100% 90% 2018 U.S. Corn Crop Condition Ratings, 6/25/2018 CCI 500 450 2018 Feed Grain Marketing Plan 10 Upcoming Reports/Events 11 80% 70% 60% 50% 40% 30% 20% 10% 0% 400 350 300 250 200 150 100 50 0 Very Poor Poor Fair Good Excellent 2018 Average Source: Crop Progress, USDA USDA June WASDE 174 bushels per acre After a cool (or non-existent) spring, growing degree day accumulation is progressing well ahead of normal in some major corn producing areas. In Iowa, Illinois, and Indiana, the state-wide average is about 200 accumulated days above normal and levels that are near the higher end of the range of reported observations in the data set. Corn yield is typically more sensitive to higher than normal temperatures during silking and grain fill, the growth stage for which numbers are just being reported for this season in the Crop Progress report. 1
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The drought index for the North Central region improved last week. The area under some form of drought dropped 8 percent and the index value fell from 62 to 50 (about average). North Central Drought Monitor, 6/19/2018 compared to 6/12/2018 Drought Monitor, 6/21/2018, North Central, http://droughtmonitor.unl.edu/ North Central Drought Monitor, 6/19/2018 % DSCI 100 500 90 80 70 60 50 40 30 20 10 0 450 400 350 300 250 200 150 100 50 0 DO D1 D2 D3 D4 DSCI 5-yr avg DSCI DSCI 2017 Drought Severity and Coverage Index (DSCI) = (DO*1)+(D1*2)+(D2*3)+(D3*4)+(D4*5); min 0--no drought conditions reported; max 500--100% under exceptional drought conditions Drought Monitor, 6/21/2018, North Central, http://droughtmonitor.unl.edu/ 3
Rainfall coverage was widespread over the Corn Belt the last two weeks, though lighter amounts were recorded in eastern Kansas and Missouri. These areas may see better rainfall prospects over the next five days (see the five-day precipitation forecast in today s Wheat Outlook). Grain Use. Friday s Cattle on Feed Report showed on feed numbers of 11.553 million June 1, the highest June 1 inventory since this reporting series began in 1996. This number is little changed from on feed numbers May 1 (11.558 million) and is 104 percent of year ago levels and 107 percent of the most recent five-year average. 000 head 12,000 11,500 11,000 10,500 10,000 9,500 Cattle on Feed 1,000+ capacity feedlots MY to date Year ago: 107% Average: 107% June 1, 2018 104% of last year 107% of average 9,000 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5-yr avg 2016/17 2017/18 Source: USDA/NASS, June 22, 2018 Broiler chick placement has been consistently running at levels 2 percent above last year. The next hog inventory report is this Thursday, June 28. 4
2017/18 Broiler Chicks Placed United States, weekly Thousand 195,000 190,000 2017/18 MY Total to Date Year ago: 102% June 16, 2018 103% of last year 185,000 180,000 175,000 170,000 165,000 160,000 155,000 Source: USDA/NASS, Broiler Hatchery, June 20, 2018 2016/17 2017/18 Outside Markets. Policy decisions by the Federal Reserve are driven by the twofold mandate to foster maximum employment and price stability. The likelihood of future interest rate increases hinge on how well the U.S. economy is performing in these two areas and the role interest rates can play to boost economic activity or rein in threats to economic stability. The Federal Open Market Committee made the decision on June 13 to raise interest rates in the context of an economy in which the labor market has continued to strengthen and that economic activity has been rising at a solid rate (https://www.federalreserve.gov/). In addition, inflation had moved close to 2 percent, the target range for the Fed. Inflation numbers consistent with this assessment were contained in the May Consumer Price Index released June 12. The all items index was up 2.8 percent for the 12 months ending in May, the fourth monthly increase in a row. Energy prices, which reverberate through many products and aspects of the economy, were up 11.7 percent. The most recent Personal Consumption Expenditures Index, excluding food and energy, was up in April 1.8 percent. The June jobs report will be released Friday, July 6. 5
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3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 U.S. Inflation: 12-month % change CPI and Fed s PCE, less food and energy All Items PCE, Core Source: Consumer Price Index (CPI) U.S. Bureau of Labor Statistics, June 12, 2018 Personal Consumption Expenditures (PCE) Excluding Food and Energy, Federal Reserve Economic Data, May 31, 2018 Prices as of 9:30 am CDT: II QTR 2018 2-Apr 26-Jun net change % change S&P 500 Index 2,581.88 2,720.35 138.47 5.36% CRB Commodity Index 193.38 195.72 2.34 1.21% SEP 18 Crude Oil 61.75 67.13 5.38 8.71% SEP 18 Copper 3.09 3.00 (0.09) -2.77% SEP 18 Dollar Index 89.29 94.30 5.00 5.60% JUL 18 Corn 3.96 3.55 (0.4125) -10.42% SEP 18 Corn 4.03 3.63 (0.4025) -9.99% DEC 18 Corn 4.11 3.74 (0.3750) -9.12% 7
Charts 4/2-6/26/2018: 8
Marketing Strategies Seasonality. The seasonal price pattern for the December corn contract shows that prices tend to have some upward momentum early in the year then drop below the yearly average about the first of July. This year s prices are following that pattern but seem early given the degree of uncertainty around both corn acres and yield. Price 440 420 400 380 360 340 2018 December Corn Futures and Seasonal Index Patterns 1/2 2/2 3/2 4/2 5/2 6/2 7/2 8/2 9/2 10/2 11/2 12/2 Updated 6/25/2018 CZ18 30-yr avg 10-yr avg Index 110 108 106 104 102 100 98 96 94 92 90 9
2018 Feed Grain Marketing Plan. Along with favorable early season crop development, trade tensions with the largest export customers for U.S. grain and oilseeds (corn and wheat to Mexico, soybeans and sorghum to China) have contributed to significant price weakness of late. China has released the list of products and tariff rates that will be in place as of July 6. These include tariffs of 26 percent for wheat, corn, and rice; 27 percent for grain sorghum; and 28 percent for soybeans ( China Responds to U.S. 301 Announcement with Revised Product List, https://gain.fas.usda.gov). My pre-harvest sales are now up to 50 percent of anticipated production for 2018. I have another 10 to 20 percent to price in this window of opportunity related to planting progress, early season crop conditions, and the approach of the June Acreage and Grain Stocks reports. December Corn Futures and 2018 Marketing Plan /bu 500 480 460 20% 20% 20% 20% 20% South American crop conditions Battle for Acres Planting Intentions Planting Intentions Grain Stocks Early season crop conditions Weather outlook Acreage Report/ Grain Stocks Weather Tassel and August Crop Report Cash sales at harvest 440 420 400 380 360 340 320 2/2/18: Sold 20% @ 393 3/15/18: Sold 20%@407 5/11/18: Sold 10% @418 300 9/1/2017 9/13/2017 9/22/2017 10/3/2017 10/12/2017 10/23/2017 11/1/2017 11/10/2017 11/21/2017 12/1/2017 12/12/2017 12/21/2017 1/3/2018 1/12/2018 1/24/2018 2/2/2018 2/13/2018 2/23/2018 3/6/2018 3/15/2018 3/26/2018 4/5/2018 4/16/2018 4/25/2018 5/4/2018 5/15/2018 5/24/2018 6/5/2018 6/14/2018 6/25/2018 7/5/2018 7/12/2018 7/19/2018 7/26/2018 8/2/2018 8/9/2018 8/16/2018 8/23/2018 8/30/2018 9/6/2018 9/13/2018 9/20/2018 9/27/2018 10/4/2018 10/11/2018 10/18/2018 10/25/2018 11/1/2018 11/8/2018 11/15/2018 11/22/2018 11/29/2018 12/6/2018 12/13/2018 10
Upcoming Reports/Events June 28 Hogs and Pigs June 29 Acreage Grain Stocks July 12 Crop Production WASDE July 20 July 1 Cattle Inventory Cattle on Feed January 6-12, 2019 Jan 22-Mar 7, 2019 TEPAP The Executive Program for Agricultural Producers, Austin, TX http://tepap.tamu.edu/ Master Marketer, Lubbock, TX https://agecoext.tamu.edu/programs/marketing-programs/mastermarketer-program/ Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas 77843 Tel. (979)845-8011 Fax. (979)845-4906 JMWelch@tamu.edu The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas A&M AgriLife Extension Service. The author and Texas A&M AgriLife Extension Service assume no liability for the use of this newsletter. The Texas A&M AgriLife Extension Service provides equal access in its programs, activities, education and employment, without regard to race, color, sex, religion, national origin, disability, age, genetic information, veteran status, sexual orientation or gender identity. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating 11