Prayin’ for Rain

“We need divine intervention.”

That was Governor Spencer Cox recently asking Utahns to pray for rain as exceptional drought conditions grip his state.

Basically, it’s bad. Like, really bad.

But it’s not only the Salt Lake that’s gradually shrinking. Dry weather is gripping nearly the entire West, with ‘exceptional’ drought conditions plaguing huge chunks of the Southwest.

Shrinking reservoirs in California are posing a major threat to crop irrigation, and dry soil conditions are concerning across the Northern Plains.

But the big story is North Dakota.

A soundbite:We seeded into dry, hard dirt, hoping the seed would lay until it rained, but the rain has never come,” noted Tyler Stafslien, a farmer from Makoti, ND.

With the Peace Garden State enduring ultra-high temps and its lowest amount of moisture in decades, farmers are in a really bad way.

With no hope of a second crop, and very little hope of a harvest at all, some farmers are running cattle out into the fields or simply abandoning what were once their wheat fields.

As it’s still early in the season, most market watchers didn’t expect the drought woes to have much effect on the USDA’s estimates released in yesterday’s WASDE report. But by next month, the impact of the dry conditions will be more evident…

Where this goes: On the bright side, the drought monitor maps did not expand last week. But with mixed reviews as to what Mother Nature has in store for the summer, producers (and the markets) are waiting to see what happens next.

When You Get A Call About Last Week’s Dicamba Application…

Welcome to June, where that nice summer breeze is… hopefully void of dicamba.

It’s the time of year when farmers will be out spraying the notorious weed killer while simultaneously crossing their fingers that neighboring producers don’t come at them with pitchforks in the case of drift damage.

At least that’s been the way June has played out since the Xtend trait saw its first widespread use in 2016.

The Office of Inspector General (OIG) decided to kick off this year’s dicamba season with a bang too. The agency released their rather salty report on their findings from an investigation into the EPA’s renewal of the dicamba herbicide label back in 2018.

The OIG found that senior EPA officials at the time overstepped their bounds and intentionally manipulated the scientific review process. In fact, many of the staff scientists wouldn’t even sign off on the final reports made for that renewal decision. In its estimation, bypassing the standard scientific process is what caused the legal debacle with the Ninth Circuit in 2020.

Worth noting: The OIG has said that during the initial registrations of dicamba, initial assessments from staff scientists were excluded to “address stakeholder risks.” Lines may have been crossed – allowing for political interference in what was supposed to be a fully scientific process –  and EPA senior officials promise to not repeat those errors.

While we are here: Lawsuits continue to mount for Bayer and BASF over damage attributed to in-season use of dicamba. Two new high-profile suits have been filed recently by a Texas grape farmer and an Arkansas honey farm. And those come as the two companies are working to appeal a jury verdict that granted $265 million to a Missouri peach farm over damages.

The Grain Bin Frenzy

Grain bin manufacturers and contractors will be rolling up their sleeves for the foreseeable future.

“On-farm storage demand is through the roof,” noted Nathan Luff, a Sukup/Brock dealer in Missouri. His take reflects industry vibes that demand this heavy hasn’t been seen in 10+ years.

How we got here: With the price of corn and soybeans soaring to recent highs and a solid 2020 harvest for most, many farmers are flush with money and are looking for a place to stash that cash. Hello, grain storage.

But it’s not just corn and soybean farmers who are driving demand…

  • Wheat prices are up.
  • Rice farmers had a strong production year.
  • Even pistachio growers, who are experiencing record production, need – you guessed it – grain bin components.

 


And that’s not all. When the derecho ripped through the Midwest last August, it damaged or destroyed 120 million bushels of grain storage in Iowa. Bin builders are playing catch up like mad.

Add in strong export demand from China and commercial grain traders are begging for more storage, too.

Bottom line: With dealers booked solid through late summer and demand funneling from all corners of the industry, wildly long waitlists will become the 2021 norm.

Say What, WASDE?

Corn and soybean data stole the show at Tuesday’s WASDE report reveal.

The commodity cousins duked it out for the top headline as 2020 corn yield projections tanked and soybean stocks were tight.

The rundown: A 3.8-bushel yield drop for corn was the first bomb to drop in the USDA’s report. The department noted that August’s derecho plus a pretty crispy summer knocked yields in the Corn Belt much more than expected. A projection dip this steep between the December and January reports hasn’t been seen in 30+ years.

On the soybean side, 35 million bushels evaporated from ending stocks, making farm economists mull over the word ‘shortage.’ But ultimately, the crop has experienced tighter supply squeezes, even in 2013-2014.

And yes, the markets noticed…

Within minutes of the USDA’s report, soybeans skyrocketed 60 cents and corn shot up to its daily limit.

What else we learned:

  • Growth in milk per cow and more dairy cows led to higher ‘20-’21 milk estimates.
  • Production estimates for beef ticked down on lower cattle slaughter.
  • Heavier pigs couldn’t offset the slowed slaughter rate as estimated supply dropped.
  • A 500K-bale decline in Texas took cotton production lower.

A Rollercoaster Ride: Ethanol in 2020

2020 has been a bit of a yo-yo for the ethanol industry.

Just last month, U.S. fuel ethanol production hit a 9-month high, averaging 975,750 barrels per day. Anticipation for holiday travel gave the industry positive vibes through November.

But…there’s always a but: Thanksgiving travel was less than stellar and ethanol use for the holiday week was 13% below the three-year average. Blending activity, also a measure of demand, fell to its lowest level since mid-June.

In the same week, inventory of domestic ethanol hit a 24-week high.

Economics 101: We’re now in a stockpile situation.

Where it’s headed: It’s common for ethanol production to increase throughout the last 3 months of the year. But with a global pandemic rearing its head and winter coming, overall fuel demand may dissolve further. Pressure may be mounting for a spring recovery for the corn-based fuel.