About This Episode
Chris Barron and Duane Lowry review the June 24, 2019 crop progress and condition reports. Corn planting was called 96 percent complete, though Lowry warns the figure likely folds in prevent plant acres from farmers who have already decided they are done, which makes week-to-week comparisons close to useless. Corn condition fell to 56 percent good and excellent from 59 percent, worse than the trade expected and worse than Lowry expected, partly because late corn only gets rated once it finally emerges.
Soybeans were 85 percent planted against expectations nearer 88 to 90 percent, and the first condition rating came in at 54 percent good and excellent, the worst opening soybean rating on record. The number that stood out most was emergence at 71 percent, meaning roughly 24.5 million acres had not broken ground on the 24th of June. Lowry reads the whole set as supportive, expects a firm tone into Friday's acreage and stocks reports, and thinks the shorts are uncomfortable.
Barron applies the roughly two bushels per week penalty for planting past the optimal date, which across five weeks on a quarter of the crop is a very large number, and Lowry suspects the loss curve accelerates rather than staying linear. He also notes the lost acres sit in the heart of the Midwest, not on the fringe, so they pull the national average down harder than usual. Corn yield may be made in August this year, with soybeans needing September.
“And for it to be the 24th day of June, and you got 24.5 million acres that haven't even made it out of the ground yet, that's more than a fourth of your soybeans.”
— Duane Lowry
Key Takeaways
Corn was 96 percent planted, but Lowry believes prevent plant acres are being counted as complete, so the weekly planting number carries little information this year.
Corn condition dropped to 56 percent good and excellent from 59 percent; part of the decline is late corn only being rated once it emerges behind schedule.
Soybeans posted the worst first condition rating on record at 54 percent good and excellent, against Lowry's expectation of something closer to 60 percent.
Soybean emergence at 71 percent left about 24.5 million acres not out of the ground on June 24, more than a quarter of the crop.
Barron's rule of thumb is roughly 2 bushels of soybean yield lost per week past the optimal planting date; Lowry argues the loss likely compounds rather than staying flat.
Traders had been long corn and short beans through the spring, so a bean-led move forces position unwinding that buys beans and sells corn.
Full Transcript
Chris: Hi everybody, this is Chris Berry and Dwayne Lowery again, back with the Ag View Pitch, and we've got an episode here the beginning of the week on Monday afternoon following the crop condition reports and also kind of see where the planting pace is at this point. How's it going this afternoon, Dwayne, and, and what are you seeing for activity in the reports?
Duane
Lowery: Good, Chris. Hello everybody, this afternoon update is going to be relatively quick. Most things we've kind of covered in yesterday's podcast, but we wanted to give an update on the crop progress and condition reports and, and see if there was anything that needed to be highlighted. The corn planting progress was labeled at 96% complete this week, and also last week's report we think probably included some prevent plant acres in that, that Farmers have already made the decision that they're done planting, and that's part of the, the complete process. So I'm not sure the planting progress on a week-to-week basis starting last week or this week makes a lot of difference because we can't separate out based on these, this data, how much is prevent plant, how much was actually planted. And so we're going to be kind of in the dark until we get more of that information.
So I don't think that's a big deal. The Corn condition was 56% good and excellent. That's down from 59% last week. That's less than people expected. And it's quite a bit less than I expected. I would not have been surprised to see the corn condition improve a percent or two just because just of the crop reaching nutrients, etc., given a better appearance. But that didn't happen. And so that's going to be a little bit of a surprise. And that'll be a little bit supportive.
Chris: Do you think some of that, Dwayne, do you think some of that was because of all the heavy rains in some of the areas and stuff that kind of made things not look so good?
Duane
Lowery: Well, I think it's probably certainly part of that. I think there's another part of it that might be attributed to the fact that they don't evaluate the condition unless the corn is up. And it's possible that last week you didn't have all corn up, and when the corn finally gets up, then it's evaluated on on the fact that it's so far behind schedule that that might have weighed the averages down too. I'm not sure if that's true, but I think that's a possibility. And so, for lack of a better explanation, I kind of explain it that way as well.
Chris: Yeah, some of that stuff when it comes up, it looks pretty good when it first comes up for that first, you know, growth stage, you know, V1 or V2, and then it starts getting into the ugly stage. That might be part of it too.
Duane
Lowery: Yeah, so that's certainly possible. The soybeans, they had their first, uh, uh, condition report as well. The planting progress on soybeans were at 85%. That's less than people expected. I think it was more like 88, and maybe somebody thought it was going to be at 90. Um, so that's less than expected. The first condition ratings, good and excellent, for the— was 54% on soybeans. That's the worst ever first, uh, condition report of the season in soybeans. So I'm actually surprised at that too. I thought we'd be— have a low number, but not as— not the worst ever. And I thought it'd probably be closer to 60%. So I guess, you know, that's going to be a little bit supportive. But the thing that out of all the stuff I saw in this crop condition report, the one that stuck out to me was the most significant was the soybean emerged, it was only 71%.
Just to put in perspective, that means there's 24.5 million acres of soybeans out there that have not even made it out of the ground, either they've not been planted or they've not emerged. And for it to be the 24th day of June, and you got 24.5 million acres that haven't even made it out of the ground yet, that's more than a fourth of your soybeans. And that's just mind-blowing to me. So I think that part of it will be a little bit friendly and a little bit supportive as well. Price action today was better than many expected. A lot of people came in expecting the market to be weaker, under pressure. That's been kind of the default setting. And we talked about that a little bit last night in the podcast yesterday. So price action was supportive. Now you got the focus on Friday's reports.
And with this information and the weekly progress data and the price action, I would imagine it's bears that are in the shorts that are feel the most pressure going into this report. So I would imagine we'll be stronger tonight and I wouldn't be surprised. There's a legitimate argument that we'll kind of firm coming in, going into this report just based on people trying to even positions and reduce risk going into that report. The weather gets a little bit of a bearish spin because it's going to have a few days of warmer weather. A little bit less precip, but not without precip. And so that spin has been a little bit negative. But there again, that was built into yesterday's pre-opening expectations and the market shrugged that off pretty well.
So when you throw it all together, I would imagine we're higher tonight and I would imagine there's a good chance we'll kind of have a firm tone going into the end of the week.
Chris: I've asked this question before, Duane, but Do you think this is enough information on the soybean side of things to have soybeans continue to lead or to literally take the lead? I don't know that it has yet, or maybe it has. What's your statement on that?
Duane
Lowery: Well, I think it's been showing signs of taking the lead, and probably since mid-late last week. And I think there have been individual days where it has shown that it's taken leadership, but then on the day that you were down on Friday, it also had kind of the leadership to the downside. So, but in general, I think that we are at a point where it's probable that beans take a little bit of a leadership here in terms of reacting to bullish factors associated with, you know, the planting season that we've had. And part, part of that is based on the fact that the corn has been known for a little bit longer, and the beans had been holding out hope. That we wouldn't have prevent plant acres, we would get stuff in the ground quicker.
And with each day, and with each weekly report that we get, you know, that, that hope that was around 2 or 3 weeks ago has kind of been dashed and replaced with the reality that there will be prevent plant acres. And we are not off to a good start in terms of planting dates. And, and so yes, I think beans probably do have the potential to take on some leadership. And it's also important important to realize that traders have been long corn, short beans as a mindset and also a position for much of this spring planting woes that we've experienced, with the exception of maybe the last week or two. And so if the beans start to push to the upside a little bit and take on some leadership, you're going to have traders unwinding those positions. That'll be buying of beans and selling the corn. So that there again helps to fuel the beans being, being stronger.
And so yeah, I think that probably is a case. And one last thing to mention, actually two last things to mention, I mentioned those yesterday as well. President Trump and President Xi meet later this week. That'll be more soybean focused. That's an unknown, but a possibility. And there's another reason for maybe shorts to be uncomfortable in beans. And then you still have the inflationary factors. You know, gold was up $22 today and has been on— this is the highest gold values have traded for quite some time. And you had the dollar weaker again today and it continues to fuel that inflation narrative and it continues to provide investors with reasons to consider moving some money from into the commodity realm. And if the stock market ever were to start to have a tip-over performance, then all of a sudden that move becomes more significant.
So those are not necessarily things that affect the grain markets or commodity markets on a daily basis, or you can point to on an everyday basis as a factor, but it is an underlying current that is, is in play. And it's been developing for a while, but it's beginning to be seen and beginning to get evidence of it. And so that's, that's another factor that's probably provide some support underneath the market as well.
Chris: One of the things you said that really strikes me is the 24.5 million acres of soybeans not emerged. Agronomically, you know what, we're 5 to 6, 7 weeks behind schedule on soybeans. And if you look at a lot of the agronomic data and statistical information, you give up from your optimal planting date about 2 bushels per week. So if you just say on average, we're maybe 5 weeks behind, that's taken 10 bushels off of 25%. And I know you said it was okay if I put you on the spot. I mean, what does that do? I mean, that's not too hard to do there. But what, what does that do? You know, does the market digest that fairly rapidly, do you think? Is that something that's going to take a while?
Duane
Lowery: I don't think it takes a while. I think the first day, or each, any day you have the bean market up, people will reach back to that what you just described and use that as an excuse for it to be up and help to fuel it. I do wonder if that the research that you cite that you lose 2 bushels a week, I wonder if that's not a progressive thing. In other words, maybe the first couple, 3 weeks you lose 2 bushels, but isn't there a point where the farther you get behind, wouldn't it be logical you're losing more than 2 bushels? Isn't it probably a progressive loss? That would be my thought.
And because we have to be getting to a point on a calendar where suddenly Midwest acres that might get you know, 50 to 60 bushel beans are probably more likely to, to be vulnerable to getting 30 to 40 just based on the growing season alone and becoming more of a, you know, double crop type of situation. So I got a feeling that we're progressing on that loss at a greater rate than just 2 bushels a week now because we're so far behind, and we're reaching the point where it becomes more of an accelerated decline. Now I have no study to back that up, but I'm just That seems— looks like it would be a logical curve to me.
Chris: On a bunch of those 24— out of that 24.5 million acres, a bunch of them are going to be zero, right? Because there's going to be some prevent plant, you know that. So that really pulls the average down too, obviously.
Duane
Lowery: No, but not only will there be some which it would be zero, and you're correct, it pulls it down. But the other thing that's important to remember, that in the case of corn and beans both, oftentimes we consider lost acreage or problems as being more fringe area. We don't consider it out of the heart of the Midwest. But we're talking about some of the, you know, acres that add to the national average, help elevate the national average, and we're losing those. So I think there's an element there that makes this loss in acreage or, and/or loss in yield much more significant than we might think of in, in often in other years. And And occasionally you'll hear people mention that, but most of the time people just want to apply the national average to these yields. And that's really not statistically accurate.
Chris: Yeah, well, all of this stuff we're talking about, again, is perspective and is probably going to add fuel to the volatility as we move forward. I know, Duane, you and I, or I made a comment last night offline after we got done talking, and obviously all of the stuff we're talking about right now after these reports here, on Monday, you know, we didn't talk about anything beforehand. We're just having this discussion right now for perspective. But one of the things we talked about offline after our discussion in the previous podcast was, you know, normally July is when you're looking at the weather for the corn crop and August for soybeans.
And this year, you're going to be looking at the corn crop, you know, being made probably this year in August, as late as everything is, and we're going to need September for soybeans and back to the soybean thing, that needing September to be ideal could get interesting and really add to the volatility for sure.
Duane
Lowery: Absolutely true. But it's also true that we have to put that little asterisk with the same storyline to the corn as well. Because as the corn— many times that, that fill period, post-pollination, how long that lasts and the weather there has a lot of impact on, on how much we're able to pack the, those, the weight into those ears and how, what that kernel size is going to be. We saw that, I think, 2 years ago where the yields ended up being better than we expected, and, and the credit was given to the, to the long and extended and beneficial, you know, fill period. So not only is the pollination date itself pushed back on corn, but it makes that fill period more vulnerable statistically to weather that may not be conducive to a full fill and maximum filling potential. And of course, you do have the chance of an elevated risk of the early frost.
But if you just remove the frost part and just factor in that the fill period may not be— maybe less favorable, and it may be shortened, that can have quite an impact on corn yields too.
Chris: Yeah, just for listeners and stuff too, for perspective, we'll be doing as time goes on, we'll be having some agronomic experts on. We're lining those up now to bring in to kind of discuss more specifics and some real-life specific things that are going on in certain states, certain areas, and kind of how to deal with some of those things. So we'll be touching on that stuff more specifically. Um, Dwayne, as we get towards wrapping things up, any final comments as we move into the rest of the marketing week? Anything that you can think of or any last comments you want to make, and we kind of get things wrapped up here for today?
Duane
Lowery: Well, um, I mentioned it, uh, in yesterday's podcast, and I probably mentioned a few times before that, um, USDA has been kind of quick to show, uh, and address problems and seem to be quick at the release and response. And, you know, we've started to see that maybe spill over a little bit into the reports that we're getting. And today was maybe another example of that where they were aggressive in lowering these condition ratings. And I think that is— continues to be something that, you know, it's difficult to ignore. You know, that being said, this acreage report every year has the potential to be very volatile with the stocks report in it, the acreage. This year it'll be equally as volatile.
And there's also going to be an asterisk behind it that whatever figure they get us— give us, there's an increased likelihood that it will be changed by a larger percentage than it normally would, just based on the fact that, you know, we, we're still a fluid situation here. And so, you know, we, we think and hope that we're— we have a reasoned analysis of what we're looking at. But markets have the ability of surprising us and Last thing I would say is this spring, our biggest corrections and down, down moves, even though they've been brief and relatively small, the biggest corrections have occurred right after we got bullish information, whether that was a planning progress or whatever. So, you know, my, my point is, you know, I sit here and I look at this information. I think we'll be higher tonight. And I think we'll kind of have a tendency to be firm into the end of the week.
But here again, we've had equally impressive weekly crop condition reports and/or planting progress reports only to see the market have an initial reaction and then be unable to hold it.
Chris: Gotcha. Well, we'll, we'll stay in touch with everybody as the week goes on. We, we may reconvene midweek, we may reconvene towards the end of the week with the report coming in on Friday. And I think that's all we've got for everybody for today, unless you had any last, any other last, last comments. Dwayne, are you good?
Duane
Lowery: No, I think I'm good.
Chris: Okay, sounds good. Well, thanks everybody for listening to the Ag View Pitch. One last comment I'm going to make is that be sure to subscribe. I know we've been texting this out to some of the key growers out there, and if it's something you do want text to you, you can let us know. But I would recommend everybody go out and subscribe to your favorite podcast provider. We're on Spotify, Apple iTunes, and various other platforms now, so we're easy to get a hold of. Email us, contact us, let us know if there's questions or anything you'd like to know, and we'd be happy to discuss that. Or if you'd like to ask questions actually online on the podcast, we're open to that as well. So everybody, again, thanks for listening, thanks for joining us on Ag View Pitch, and we'll catch you next time.