"Reports on yields are well under expectations coming in. It really shows the impact of record-high heat seen in month of July. Another factor in this report will be the amount of harvested acres we're going to get. There are a lot of zeroed out fields showing up in Midwest," Roggensack said Thursday. "If yield is down and we see a jump in lost acres, corn production estimates ranging from 9.6 billion bushels to 11.89 billion bushels. This is scary because last month, USDA had a 12.72-billion-bushel usage number. The production number could come in at 10.5 billion bushels and a 127-bushel average yield estimate. That means we would need to price out about 2.47 billion bushels from demand."
Where's that demand drop going to come from? Dan Basse, president of AgResource Company, said Thursday though there are a lot of potential losers, the sector most likely to bear the brunt of the demand slash will be the livestock industry, especially considering more than 1/3 of the U.S. corn crop is mandated to ethanol (though Basse argued suspending the mandate may not have that large an effect). But, with coarse grains in such tight supply around the world, the human population in parts of the world could also see some major changes.
"Who's going to go without? Our bet is the livestock producer is going to bear the biggest burden," Basse said. "This is getting people in the United Nations concerned. The poor of the world are going to see tremendous pressures on calories. It's particularly scary for the impoverished in the world."
Basse says there are 2 other major wild cards moving forward: China and what happens to U.S. crops between now and harvest. The latter depends much on not just any rainfall moving forward (which Basse and Roggensack agreed may or may not be of much help to either the corn or soybean crop at this point) but also any issues like disease that could trim the useability of the grain that does make it into the bin.
"There's going to be a lot of trouble with aflatoxin in corn and light test weights in soybeans," Basse said. "Let's just hope we don't have an early frost."
And, at the clip at which China's been buying U.S. soybeans lately, how that nation adjusts its pace of purchases will go a long way to determining not just the price moving ahead, but whether or not there will be a supply of soybeans at all.
"This has quickly become a situation of not what price buys the grain, but do you have the grain, period," Basse said. "The Chinese buyers are forthcoming. There's a point we'll reach where we've sold half our beans before we even start the next crop year."
Until those outcomes are reached, Basse and Roggensack agree there's going to be a lot of fuel for the bulls in the next few weeks in both the corn and soybean pits.
"It's a skary kind of market for consumers and end-users," Basse said. "I expect this bull phase to last until we determine how small the crop size is and what global grain supplies look like."
Added Roggensack: "We're going to have a massive run higher in order to slow down demand."
