Missing Reports

Jan 24, 2019

By Brenda Boetel

Last week appeared to bring no movement toward a resolution regarding the partial government shutdown. As such, several reports were not available, including the World Agriculture Supply and Demand Estimates, Quarterly Grain Stocks, Winter Wheat and Canola Seedings and weekly export sales. Next week will see the absence of the Livestock Slaughter and Cattle on Feed report, and if this shutdown goes into February, the semi-annual Cattle report will be affected.

The markets will continue to make assumptions about the content of these missing reports. The longer the lack of information prevails, the greater the market correction may be when the reports resume, especially if the reports say something different than the market assumed. The cattle markets care about last week’s missing reports, because they gave the final information on the size of the 2018 corn harvest, the speed in which corn is being used, and the first hint of information regarding how many acres of each crop will be planted in 2019. The market is trading on old-information, a less-than-desirable situation.

The WASDE report likely would have shown a decrease in 2018 corn yield. Additionally, poor harvest conditions affected acreage as well as yield. The USDA would likely have lowered 2018 corn production from 14.626 billion bushels to around 14.545 billion bushels. The February report will begin to adjust the demand side of the equation and examine more closely whether usage estimates for ethanol or exports needs to be adjusted.

Corn demand appears to be strong, with exports appearing to be greater than USDA expectations and feed and residual usage likely up. Ethanol production has been low, but strength in other usage likely makes up for the lower ethanol production. The overall impact of these demand factors would likely have USDA keep usage constant in February.

As the year progresses, we will need information on acreage intentions to get a glimpse into long-term corn prices, but for now, expect corn price to continue to behave seasonally and increase until mid-April/early-May.

Source:osu.edu

Video: Wheat Yields in USA and China Threatened by Heat Waves Breaking Enzymes

A new peer reviewed study looks at the generally unrecognized risk of heat waves surpassing the threshold for enzyme damage in wheat.

Most studies that look at crop failure in the main food growing regions (breadbaskets of the planet) look at temperatures and droughts in the historical records to assess present day risk. Since the climate system has changed, these historical based risk analysis studies underestimate the present-day risks.

What this new research study does is generate an ensemble of plausible scenarios for the present climate in terms of temperatures and precipitation, and looks at how many of these plausible scenarios exceed the enzyme-breaking temperature of 32.8 C for wheat, and exceed the high stress yield reducing temperature of 27.8 C for wheat. Also, the study considers the possibility of a compounded failure with heat waves in both regions simultaneously, this greatly reducing global wheat supply and causing severe shortages.

Results show that the likelihood (risk) of wheat crop failure with a one-in-hundred likelihood in 1981 has in today’s climate become increased by 16x in the USA winter wheat crop (to one-in-six) and by 6x in northeast China (to one-in-sixteen).

The risks determined in this new paper are much greater than that obtained in previous work that determines risk by analyzing historical climate patterns.

Clearly, since the climate system is rapidly changing, we cannot assume stationarity and calculate risk probabilities like we did traditionally before.

We are essentially on a new planet, with a new climate regime, and have to understand that everything is different now.