In this rare Sunday edition, just a quick update. We are nearing harvest close up north as the weather changes and nightly freezes make morning harvests a challenge for whatever goodies are still left on the stalks. I doubt much is left in the actual fields up north, but down south, second harvest has come up, mostly cotton, and some late planted sorghum that some folks planted after a dismal corn harvest, wild fires and drought have caused in come places catastrophic losses.
That being said, on Wednesday of this week the USDA will publish the World Agricultural Supply and Demand Estimates, or WASDE as you will hear row croppers and commodities traders refer to. Row croppers pour over this report and watch the basis and spread prices of grain because “I’m not getting screwed by the co-op this year”. More on that another time. This months’ edition we are looking for write downs on total supply and increased world demand. If the Ukrainians and Europeans haven’t gotten their supplies in storage or exported, the crop doesn’t exist. Most of Europe is north of the US, so let that be a guidepost for weather and first freeze. Think – the 40th northern latitude parallel goes through Philadelphia, south-central Spain, leaving France, Germany, Ukraine and almost all of Europe and Asia well north. First freeze for Texas is December, first freeze for anyone above 40 degrees is next week. Potentially could have already happened.
A few scenarios will play out. Either the WASDE will show a) rogue phantom supply and steady demand, decreasing grain costs, b) diminished supply and steady demand, slightly increasing grain costs, or c) supply in the toilet and demand through the roof, which will cause a commodities meltdown and higher prices will march through the rest of the year and into next. Now keep in mind, winter up here means summer down south, and South America and Australia are net exporters of food stuffs since the southern hemisphere only collectively has 1/5 the population of the northern hemisphere. However, main southern hemisphere capabilities are confined to three countries: Brazil, Argentina and Australia. Drought persistent in South America could dampen yields, buts it too early to tell. Argentina is still enjoying frozen nights and 40-50 degree weather in the lowlands in the south. Buenos Aires has a high of 66 today, balmy, and potentially some rain scattered. Brazil, however, should be on a post election plant frenzy. Or should start to see first emergence.
My personal prediction would be scenario B. Anything not irrigated this year wasn’t productive. A lot of fields that didn’t have pivots simply didn’t get planted. We chopped a lot of corn stalks to feed to the cattle. There also hasn’t been any dire reports of major supply shortages, with the majority of the shortfalls in places where they have historically always experienced, or were known but not widespread. Yes, yields we’re in the dump, shipping is a challenge, fertilizer is a huge issue, but current supply has been binned or sold on contract to processors, crush operators, or ethanol producers. The pinch will most likely come hard next year, although with this many variables, I might have to revise my position.