Good morning friends
The story this morning continues to be the collapse in emerging market currencies. Row crop traders are watching the Brazilian Real closely as trades just above the 2015 low when the Real traded near 4.28 to 1. We are already at an all-time closing low against the greenback, further weakness in the Real will make US product less competitive on the margins, while increasing input costs for folks down there. Corn priced in Real is trading at record highs going back to, you guessed it, 2015. The Turkish Lira continues its collapse as well, which is weighing on cotton prices. The USD is king right now, one has to wonder where corn would be trading without the significant pressure these currencies are providing. I think it is a good example of the side effects US commodity producers are feeling from the Trump trade policies. I’m not saying they are good or bad, they just are. For US row crop prices to trade in levels seen between 2007 and 2014 (barring the drought years) we need to see the US dollar policies loosen, in my opinion.
Crop progress was released yesterday, it is becoming less and less of a factor given the USDA report will be out in a week to negotiate much of what is being rated. Corn ratings fell 1% to 67% G/E as the crop gets downgraded out west in Nebraska and Kansas. Soybean ratings came in unchanged for the week at 66% while cotton continues its yang and yang with Texas ratings. Last week they were up 4%, this week they fell again. Over 53% of the Texas crop is rated poor to very poor. Going into next weeks WASDE, expectations for corn and bean yields will be around 178 and 53 BPA.
Cotton yield projections are a complete wild card, and probably a waste of time. USDA has yield at 911 pounds per acre or 1.9 bales per acre, which is fantastic given the conditions numbers. The real wild card will be about how they view harvested acreage. Right now they have written down 3.4 million acres. Given Texas plants 7 million acres and half is rated p/vp, 3.4 million may not be enough. I doubt we see prices for corn, beans or cotton break out before we get the September numbers. Crop conditions came in at 41% G/E and 24% for Texas. It will be interesting to see how the tropical storm affects conditions in the coming week along the Mississippi coast. Bolls are open now for 55% of the Mississippi crop as compared with 32% as the 5-year average and heavy rains could cause quality damage. The International Cotton Advisory Committee lowered their world cotton ending stocks estimate for the 2018/19 season to 16.91 MMT from 17.71 million last month and from 18.74 MMT last year. Cotton is in its annual pre harvest lull. I would like to think we can see 85-90 cents again, but I worry this dollar story will continue to pressure. Producers will December puts on may want to look at rolling protection to March given the remaining time value. Give me a shout and I can price some options for you if you are interested. I would remain hedged on new crop.
Wheat markets collapsed yesterday as expectations for any bullish news regarding export taxes or quotas out of Russia were not mentioned in Monday’s meeting between Russian ag officials and exporters. Regardless, the market is still indicating a shift from the Black Sea to elsewhere beginning in November. Australia remains adversely dry, that supply will come from the western hemisphere. I am awaiting the Egyptian tender this morning for delivery in the last week of October. Russia will likely dominate the wheat trade for the next few months, but these tenders will be interesting to observe as we come into the end of the year. If Russia is truly worried about export supply, we should see the offers go up.

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