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ANALYSIS: Corn and soybeans in the US Midwest prepare for drenching this week

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The Gulf of Mexico expects to be clobbered by two tropical storms this week.

 

These are unlikely to directly impact the US Midwest’s developing corn and soybean crops - but they may well drag some much-needed rainfall for parts of the Midwest in their wake. The Atlantic Basin hurricane season officially concludes at the end of November, although the peak tends to be mid-August to late October.

 

The November-dated soybean contract approached the $9.20 per bushel mark last week - trading at its highest level since January this year - but thanks to the promise of more rainfall could not sustain that level and by midday today was trading around $9.04 cents per bushel.

 

Corn yields in Iowa, the biggest corn-producing state in the US, are being marked lower from the USDA’s latest forecast of 202 bushels per acre, thanks to the storm damage wrought on August 10.

 

However, the markets are being pulled in opposite directions by two forces: on one hand, continued massive demand from China; on the other, improving rainfall prospects.

 

Corn and soybeans both need an inch of rain per week during critical growing phases - and both crops are close to their final growth stages.

 

Solid development

 

The USDA says that by 16 August 76% of the US corn acreage was at or beyond the dough stage, stage four of six, meaning that the kernels have accumulated half their total of dry weight; 69% of the corn was rated "good to excellent" - 13 points above last year (which got off to a slow start because of too much rain).

 

The USDA’s rating for the soybean crop put 72% of it at "good" or "excellent", 19 points higher than last year. With the harvested area stimated by the USDA are just over 83m acres, total supplies for US soybeans in 2020-21 are likely to be more than 5bn bushels

 

And despite the overall harvest reduction estimated by the influential private-sector Pro Farmer crop tour of the seven most important corn and soybean states, the corn crop would be the second-largest ever; that for soybeans would be the third-largest.

 

Harvest weather

 

Corn in some south-eastern states has already started to be harvested, although in most it will last until early November. The soybean harvest will not start until October.

 

Further total crop estimates are likely before the final total is known - and by this stage they can only be downwards. Much will depend on weather conditions.

 

The main push me-pull you factors (China’s demand versus expected large crops) could well prove impervious to adverse weather - certainly the Midwest should avoid the worst of the hurricane season.

 

Yet uncertainties abound, such as if and how an economic recovery in the US will influence ethanol demand - roughly 40% of the US corn crop goes into fuel ethanol.

 

What is missing from the current thinking regarding the US weather outlook is any consideration of its possible impact on cotton.

 

With cotton largely grown south of the 36th parallel and in the US south-east and not harvested until as late as December, southern farmers are vulnerable to intense hurricane seasons. That of 2020 is expected to be very busy, with as many as 25 named storms - twice the average number - now expected.

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