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There is talk building about corn being rejected due to aflatoxin in southern Illinois recently, but no specifics are being reported. As corn harvest drifts further north, yields appear to be picking up from the horrific yields that came from the driest/droughty soils, but until we get into the main corn harvest next month, it will remain difficult to get a handle on overall yields and quality. Yesterday, Dr. Michael Cordinnier cut his US corn yield estimate 2bpa to 123bpa USDA 123.4) and his soybean yield estimate a sizeable 2bpa to 36bpa (USDA 36.1). Dr. Darrell Good from the University of Illinois noted in a report that the history of changes in yield forecasts in dry years provides a mixed picture, particularly for corn. The US average corn yield estimate in January following harvest was below the August forecast by 2.2 bushels in 1980, 18.3 bushels in 1983, 12.1 bushels in 1995, 12.2 bushels in 2010, and 5.8 bushels in 2011. The January yield estimate was above the August forecast by 0.8 bushel in 1991, 6.1 bushels in 1988, and 4.8 bushels in 2002. For soybeans, the January estimate was below the August forecast by 0.6 bushel in 1980, 4 bushels in 1983, 2.3 bushels in 1984, 1.5 bushels in 1995, 6 bushels in 2003, and 0.5 bushel in 2010. The large decline in 2003 reflected, at least in part, widespread damage from soybean aphids. The January estimate was above the August forecast by 0.8 bushel in 1988. The pattern of yield forecast changes was different in each year for both corn and soybeans. Current expectations for corn appear to be in a range of 5 bushels above to 5 bushels below the August forecast of 123.4 bushels, while expectations for soybeans are one or two bushels above to one or two bushels below the August forecast of 36.1 bushels.
Russia's drought has destroyed 7.3% of the country's grain harvest with damages estimated to be around $1.1 billion, the country's agriculture ministry said Tuesday. In total, more than 5.56 million hectares of farm land has been ruined by the drought, according to data collected from 21 regions around the country, the ministry said. The ministry recently lowered its estimate for the country's grain harvest this year to 80-85mmt due to severe winter frosts and the ongoing drought through much of Russia's south. Last year's harvest yielded 94.2mmt.
It comes as no surprise that another couple of major livestock producing states' governors have joined the chorus asking for a suspension of the RFS. North Carolina Governor Beverly Perdue and Arkansas Governor Mike Beebe have petitioned the federal government to suspend its production mandate for corn-based ethanol in efforts to lower prices for the grain that livestock producers depend on for feed. The governors' petitions follow recent, similar requests by representatives of livestock producers and federal lawmakers, who asked the EPA to reduce the amount of ethanol required to be produced. Maryland Governor Martin O'Malley and Delaware Governor Jack Markell sent a joint letter to EPA Administrator Lisa Jackson last week in support of the livestock groups. Tom Kloza of the Oil Price Information Service, or OPIS, doesn't believe the use of ethanol will be curbed, and the current talk about it is political posturing. "If they suspended the mandate, prices would initially skyrocket," he said. "You would have chaos because the infrastructure in the petroleum gasoline motor fuel refining industry has transitioned to 10 percent ethanol as part of the gas. You couldn't just flip a switch and ask all these refiners and suppliers to get to 87 octane. "Refiners have changed the kind of gas they make. They make a low octane gas because they know ethanol is going to be added," Kloza said. The 6-month RBOB/Ethanol strip closed at $0.28/gallon yesterday, keeping a bid under ethanol and the rationing job incomplete.
Soybeans may not be gaining any production, in spite of what appears to be better weather. In years which saw the August yield estimate at least 3% below trend (such as this year), a further decline of an average 1.2bpa decline in yield occurred in USDA tabulation from August to January. Prior to the reduction in usage in last Friday's report, analysts were already suggesting that roughly 85% of the US soybean crop would need to be shipped/crushed by March 1st, 2013 to meet global demand. We've never had a situation like this before and the record large inversions seen in spreads has already reflected the extreme difficulty in obtaining adequate supplies to meet demand.
US Dollar Daily Chart
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08-13-12
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NOTE: With the exception of livestock, all trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.
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Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable to Heartland Investor Capital Management , Inc. but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK of LOSS involved in trading futures and / or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL . NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. The information contained in this newsletter is privileged, confidential and protected from disclosure. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited.
Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.
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