By Doug Tenney, Leist Mercantile
China was an active buyer of U.S. corn and soybeans during August. That trend continued into the first week of September. It appears their appetite for U.S. grains is large. The concern of China meeting their Phase 1 trade deal agreement of $36 billion of U.S. agricultural goods in the first year of the agreement garners significantly less attention than it did earlier this summer. The amount of U.S. corn China will purchase in the current marketing year ending next Aug. 31 continues to increase. Current USDA estimates had China purchasing 7 million tons of U.S. corn. Yet, just days into the new marketing year the first week of September, they had already purchased a total of 9 million tons of U.S. corn. Estimates of total corn imports into China are as high as 15 million to 20 million tons. The U.S. share could reach 12 million tons.
The August USDA WASDE report pegged the 2020 U.S. corn yield at 181.8 bushels and a U.S. soybean yield at 53.3 bushels. Those numbers will be the high estimates for the year with reductions expected in the months to come. Why? Hot, dry weather in August reduced yields in large areas of Iowa, along with similar results on a smaller number of Illinois acres. In addition, the Aug. 10 derecho across Iowa affected millions of acres of corn and soybeans and will reduce the Iowa yield for those two crops.
Harvest time this fall in Iowa will not be able to be described as merely “terrible and horrific.” Millions of bushels of both on-farm and commercial storage were severely damaged and or destroyed beyond repair. A very small amount of damaged storage will be able to be repaired due to time constraints and manpower. Corn affected by the derecho and then harvested, could be of poor quality and low test weight. Poor quality corn will need to move somewhere and not kept at home even if on farm storage is available. Movement to ethanol plants or feedlots will be alternatives.
All eyes will be on the September 11 USDA WASDE Report as it includes U.S. corn and soybean yield estimates. History shows very little changes in yields published with the September report compared to August. It would seem the U.S. corn yield will fall below 180 but unlikely to move below 175. Similarly, the US soybean yield will decline but struggle to fall below 50 bushels per acre. Early September comments indicate the U.S. soybean yield would need to fall below 50 bushels per acre to keep upward price marching higher. The contract high for November CBOT soybeans is $10.06, with the high for the past year at $9.8275. On Sept. 4 they closed at $9.65. December CBOT corn had a high of $3.63 in early July. Those levels were eclipsed on Aug. 31 as it reached $3.6425. Consistent closes above $3.60 will likely be needed to see further advances higher.
Export demand for U.S. grains continues to be a huge unknown. As of early September, U.S. wheat sales were 9% ahead of a year ago, corn sales were 11% behind a year ago, and soybean sales were 3% behind a year ago. It would take COVID-19 to be behind us for demand and grain prices to march higher enabling U.S. farmer income to increase from levels seen in the past year.
Expect corn and soybean harvest to be well under way in Iowa and Illinois the second and third weeks of September. Many Ohio producers will not start harvest that soon as early October may be a more accurate time frame. Ohio corn and soybean yields are likely to be just plus or minus average yields with new record yields seen in limited fashion.