IGC Raises Global Grain Forecasts To Near Record

The International Grains Council raised its forecast for total global grain output this season by 20 million metric tones to 2.046 billion, which would be just 1 million metric tons below the standing record set two seasons ago. The increase includes a +6 million metric ton addition to world wheat production, now estimated at 735 million metric tons. IGC notes an improved outlook for the U.S. and Russia more than offset downgraded expectations in the E.U. The bulk of the upgrade came from an increase of +14 million metric tons to 1.017 mmt in the forecast for world corn production. IGC says crop prospects in the U.S. account for most of the production increase. IGC also increased estimates for grain demand, pegging the global total at 2 billion metric tons. This would be only the second time consumption has been that high, with IGC saying food, feed and industrial demand could all potentially hit new all-time peaks. However, they still see global grain stocks at the end of the 2016-17 season at 488 million metric tons, which is up 6 million from their previous estimate. The new forecast reflects higher corn inventories, with the grain seen facing “strong” competition in the feed market from wheat, thanks to a “below-average-quality” wheat harvest.

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What Will Bring Soybean Bulls Off The Sidelines?

Soybeans, similar to corn see crop-conditions left “unchanged” at 71% rated “Good-to-Excellent”. This is a whopping 9% above the rating given to last years crop which produced a record setting yield of 48 bushels per acre. Soybeans “setting pods” were reported at 35% vs. 29% last year vs. 26% on average; Soybeans reported as “blooming” are reported at 76% vs. 67% last year vs. 66% on average. Bottom-line, the trade doesn’t see much reason to be concerned as long as the rains come as forecast the next few weeks. The bears continue to question “demand” as prices have broken by well over -$2.00 per bushel while demand for U.S. supply has not gained any additional interest. The macro bulls have also aggressively backed out of the trade as the U.S. dollar shows renewed strength and crude oil prices trade back down to levels not seen since mid-April. To put it simply, the commodity bull has again given the market a head-fake and moved back to the sideline. Bottom-line, we just don’t have a lot of bullish horsepower in the market right now. Yes, there remains some uncertainty in regard to the U.S. crop, but based on the current forecast and movement of soy in South America the “supply-side bulls” now appear most comfortable taking shelter on the sideline. This apparent triple-liquidation and movement to the sideline by the “supply-side”, “demand-side” and “macro” bull is simply too overwhelming for the market and provides the bears with all the momentum. Personally I don’t see the “demand” or “macro” side of the story changing within the next 30 to 45 days. That leaves most all of our upside potential in the hands of weather here in the U.S. and the availability of bushels out of South America.

  • Arkansas, Illinois, Indiana, Iowa, Missouri and Wisconsin all raised higher by +1%
  • Kentucky, Minnesota and Nebraska conditions left “unchanged”
  • Michigan and North Dakota conditions lowered by -1%
  • Mississippi, North Carolina and Ohio rating lowered by -2%
  • Kansas and Louisiana lowered by -4%
  • South Dakota and Tennessee lowered by -5%

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Corn Conditions Have Bears Again Pointing To A Massive Crop

Corn crop-conditions were left “unchanged” at 76% rated “Good-to-Excellent,” allowing the bears to run wild with talk of a massive crop, insinuating perhaps a fresh new-record yield north of 171 bushels per acre is sitting in the field. Corn “silking” was reported at 79% vs. 71% last year vs. 70% on average; Corn in the “dough” stage was reported at 13% which is right on pace with our historical average. Below are state details –

  • Illinois conditions raised higher by +2% to 82% rated GD/EX
  • Minnesota conditions raised higher by +2% to 84% rated GD/EX
  • Indiana conditions raised higher by +1% to 75% rated GD/EX
  • Iowa conditions raised higher by +1% to 82% rated GD/EX
  • Missouri conditions raised higher by +1% to 74% rated GD/EX
  • Kentucky conditions raised higher by +1% to 73% rated GD/EX
  • North Dakota and Wisconsin conditions left “unchanged” at 78% and 86%
  • Nebraska conditions lowered by -1% to 79% rated GD/EX
  • Kansas conditions lowered by -2% to 67% rated GD/EX
  • Michigan, North Carolina, South Dakota and Tennessee lowered by -3%
  • Colorado, Ohio and Texas conditions lowered by -4%
  • Pennsylvania conditions lowered by -9% to 62% rated GD/EX

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What’s At Stake In The Upcoming November Election

On Tuesday, November 8, 2016, Americans across the country head to the polls to cast their ballots for a wide range of offices. Up for grabs is of course the U.S. Presidency, and also key seats in Congress. Needless to say, it’s a pivotal election cycle for our country’s two main political parties. The 2014 elections gave the Republicans control of the Senate, and subsequently control of both houses of Congress for the first time since the 109th Congress of 2005-2007. With 247 seats in the House of Representatives and 54 seats in the Senate, this Congress began with the largest Republican majority since the 71st Congress of 1929–1931. Below is an outline of what’s at stake this November and some of the possible outcomes that has the investment world in deep thought. The big risk doesn’t necessarily seem to be a Donald Trump victory, because it could come along with a surprise flip in power in the Senate. The real risk could be a complete controlled Democratic government. A Clinton victory could perhaps coincide with a flip in power of both the Senate and the House. It seems highly improbable at the moment, but who knows how many Democrats are going to show up at the polls as part of the “Stop Trump” campaign. Bottom-line, there’s a lot at stake in the upcoming election!, it’s not just about “Trump vs. Clinton”.

Senate: The Senate has 34 seats up for election in November. Many political pundits consider this to be the “big story” of this election cycle.

  • Democrats need to gain either four or five seats (four if Clinton wins, five if Trump wins) to gain back control of the Senate. 10 of the seats up for reelection are currently held by Democrats, while 24 are currently held by Republicans. Only 1 Democratic-held seat is considered to be “in play” (at risk), which is Nevada. Some analyst think Colorado could join that list eventually. Republicans on the other hand have 16 seats considered to be in play or possibly at risk. At least six are believed to be in significant danger – Wisconsin, Illinois, Pennsylvania, Florida, Ohio, and New Hampshire. Many political insiders say by it being a Presidential election year it actually favors the Democrats as it will spur more voter interest and make reelection for some Republican Senators more challenging. In other words, more Democratic voters actually go to the polls when the nation is voting for a President, rather than in years where no Presidential decision is being made. Keep in mind during the past decade, Democrats have picked up seats in both the Senate and House during all Presidential elections.

House: All 435 House seats are up for election this November.

  • Democratic Party would need to gain 30 seats to flip the political power inside the House. Most political insiders doubt they’ll be able to accomplish such a daunting task. However, they very well could reduce the majority Republicans hold, opening the door to possibly jumping ahead in mid-term elections in 2018. Again, increased voter interest and turnout due to the coinciding Presidential election could benefit Democrats, as has been the trend for the last decade. Ballotpedia predicts that only 25 of the 435 House races (5.7 percent) will be truly competitive in the general election. These include seats in Arizona, California, Colorado, Florida, Illinois, Iowa, Maine, Michigan, Minnesota, Nevada, New Hampshire, New York, Pennsylvania, Texas and Wisconsin.

More Key Concerns

  • Supreme Court: Assuming the Senate continues to deny President Obama’s Supreme Court nominee, the new President and Senate will have the task of replacing the late Supreme Court Justice Antonin Scalia. Confirmation of a new Justice requires 60 votes in the Senate. If control of the Senate goes to the party opposite the one in the White House, it is bound to be a contentious fight. Keep in mind that some of the current Justices are getting up there in years – the oldest, Ruth Bader Ginsburg will be 83 this year; Anthony Kennedy turns 80;and Stephen Breyer will be 78. It seems highly probable that one or more may retire over the four year term of the next President.
  • Immigration: This is one of the more divisive issues in America right now and a new President could do a lot to shape policy. Donald Trump and fellow Republicans mostly lean toward tighter levels of enforcement, including removal of undocumented residents and temporarily blocking Muslim immigrants. Democrats lean more toward Obama’s plan, recently kicked by the Supreme Court, to shield undocumented immigrants from deportation and allow them to work in the U.S. legally. Once the case moves back through the lower court, it could very well be brought back before the Supreme Court. Remember, it was only sent back to the appeals court because the Supreme Court ruling was tied, as they are short one Justice.
  • Health Care: Although the Affordable Care Act – or Obamacare as it’s known – was signed into law in 2010 and survived a major Supreme Court challenge in 2012, it continues to be a hotly contested and divisive issue in this election. The fundamental disagreement rests on whether the government can or should legally require its citizens to have health insurance. Republicans continue to vow to overturn the law, but their attempts have never been able to make it past a Presidential veto. That could change if Republicans manage to sweep all the elections. On the other hand, Affordable Care Act legislation is likely to be enhanced under more Democratic leadership. It’s also likely that the longer the program is in place, it will be that much more difficult to dismantle.
  • Gun Control: Several gun control measures have been introduced in Congress, though none of them have yet gotten a vote. Proposals include blocking the sale of guns to people on the government’s terrorist watch list, strengthening background checks and putting limits on semi-automatic weapons. The divisions on the issue fall largely along party lines, with Democrats supporting stronger legislation and Republicans opposing it. Complete control in Washington by one party or the other could mean a huge swing in direction for gun laws.
  • Abortion: This is another flashpoint in American politics and one that could well up in front of the Supreme Court again. Issues include prohibitive restrictions to abortion access to abortions in some states, funding for Planned Parenthood and allowing businesses to opt out of providing health care services that include contraception and abortion.

Competition in Ag Continues To Heat Up Between U.S., Brazil and Argentina

Soybeans and corn are among the top five most important agricultural exports in terms of global export value. International agricultural markets are very competitive, and several commodity markets are dominated by a small number of major exporters. In a recent report from the USDA Economic Research Service, analysts compare production costs and export competitiveness of corn and soybeans among three leading exporters: the U.S., Brazil and Argentina. Between 2008 and 2012, these three countries produced an average of 88% of world soybean exports and 73% of corn exports. Fifty years ago, the U.S. exported more corn, soybeans, and soybean products than any other country in the world. Since then, Brazil and Argentina have become important producers and traders of these crops and now compete with the U.S. in world markets. Take Argentina for example, which has become the number one exporter of soybean meal and soybean oil, with one of the most competitive crushing sectors in the world. Brazil has also expanded soybean production and exports at an accelerated pace, fueled by strong demand from China, while Argentina’s expansion in global corn markets is rooted in a strong demand for corn form Middle Eastern countries. During the 2012/13 marketing year (after a severe drought in the U.S.), Brazil exported more corn than the U.S. for the first time, and while the U.S. is still the biggest exporter of corn and soybeans, its share is trending lower. To explore more from this very detailed report check out the ERS – Corn and Soybean Production Costs and Export Competitiveness in Argentina, Brazil and the U.S. This report is definitely one to keep in your library as it contains tons of interesting data.

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