All of us become a little more philosophical as we age. The recent impact of hurricanes and tornadoes along with flooding makes all of us realize that some of the things we thought were important in life are not. A few years ago, a farmer friend of mine sent me a copy of some interesting comments from Charlie Chaplin. Many of you are too young to have even heard of him, but he was a famous actor and comedian, who lived 88 years.
He left us four statements:
1. Nothing is forever in this world, not even our problems.
2. I love walking in the rain because no one can see my tears.
3. The most lost day in life is the day we don’t laugh.
4. The six best doctors in the world: sun, rest, exercise, diet, self-respect, friends. Stick to them at all stages of your life and enjoy a healthy life.
He also shared the following thoughts:
• If you see the moon you’ll see the beauty of God.
• If you see the sun you will see the power of God.
• If you see a mirror you will see God’s best creation so believe it.
We are all tourists, God is our travel agent who has already identified our routes, bookings and destinations. Trust Him and enjoy life. Life is just a journey! Therefore, live today! Tomorrow may not be. – Charles Spencer Chaplin, 1889-1977.
That might be more philosophical than some readers want to see. So be it. For many farms it has been a difficult year. The tragic weather disasters recently, and war in the Middle East and elsewhere, are a reminder to keep our problems, however serious they might be, in perspective.
Turning to the ag markets, several factors contribute to making October a challenging month in commodity markets. Consider:
• Final yields are always in question. The USDA provided some more guidance on that today (see below).
• Producers are in the field this time of year and don’t have time to concentrate on marketing.
• This year hurricanes and tornados are causing havoc from North Carolina and South.
• Politics is more bitter than ever. Everyone is trying to determine how our businesses will be impacted with a new administration after January.
• Strikes at ports along the east coast and the southern border have caused at least a temporary interruption of the flow of goods. While a short-term solution may have been reached, the longer term is still in question.
This year more than most the market is being impacted by unusual fundamental changes. These fundamental changes are occurring as the market in grains is transitioning from a long-term bear market to a sideways trading range and hopefully into a bull market.
This is all happening at a time when net U.S. global agriculture trade is at an all-time new low (see below). Most of this is due to increased competition from Brazil. Add to that increased production from other countries around the world and the bottom line is we have a gigantic hill to climb in order to get back to the periods of trade surpluses from 2010 to 2014.
October Crop Report No Surprises
If there was any surprise it is that the USDA made very few changes to any of the supply and demand tables. Yields were left nearly unchanged in both corn and soybeans. Their estimated corn yield is 183.8 versus a previous estimate of 183.6. In soybeans, yield was estimated at 53.1 versus the previous estimate of 53.2.
Analysts were on average expecting the corn yield to be lowered to 183.4, although we were expecting a small increase. The corn carryout of 1.999 billion bushels is down from 2.057 billion last month, but above the average analyst estimate of 1.962 billion bushels.
Soybean ending stocks were left unchanged at 550 million bushels, in line with the average analyst estimate of 549 million. The soybean crop estimate was essentially unchanged at 4.582 billion bushels on a yield of 53.1 bushels/acre, down slightly from 53.2 last month. Crop estimates for Brazil and Argentina were left unchanged, both for corn and soybeans.
The only real significant change this week was technical in nature. Note in the November soybean chart on the soybean page that the market broke through some major support. At this stage November beans will likely test the support at $10.00. We do not anticipate that beans will make new contract lows.
Soybean meal has a similar pattern but is still holding above key long-term support. Very difficult to argue a bullish case in soybeans, particularly as you focus in on the world soybean stocks shown below. Longer term, however, on the positive side we still feel that the lows are in for both corn and soybeans. They need to go through a base building phase at this point. Odds are that process will begin as soon as harvest is completely over. Seasonally both corn and soybeans have high odds of making bottoms in the September/October timeframe.
The biggest number change was in cotton where production was lowered from 14.5 million bales in the September estimate to 14.2. This is still substantially higher than last year’s crop at 12.07 million bales. However, exports were lowered from the September estimate at 11.8 million bales down to 11.5. Ending stocks were increased from 4.0 to 4.1 million bales. This is a significant increase over last year’s 3.15.
The bottom line is there was no significant shift in the fundamentals for corn, soybeans or wheat. If you didn’t take your eyes off your combine monitor Friday it was probably for the best. As tough as October can be for marketing and long hours on the farm, it is hopefully just as rewarding as the years’ work culminates into a bountiful harvest.
