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Market Commentary for 9/5/22

Jon Scheve with weekly market commentary made on September, 5, 2022

The market is struggling to accurately estimate yields in the field. Plus, demand remains uncertain, especially with China's new covid city lockdowns this past week. Concern over the world economy has kept pressure on the markets as well. It seems the market could be in a holding pattern until the September 12th USDA yield report is released.


Avoid Catching “Backyard-itis”

“Backyard-itis” describes farmers who feel the weather conditions in their immediate area are more widespread than they really are. Usually, it happens when a farmer’s crops are not doing well, but I occasionally see it the other way too. A common symptom of this “disease” is wondering why the markets are not reacting as much as they should, given the weather conditions a farmer is seeing nearby.

Recently, I have seen many social media posts of farmers with their corn ears estimating yield potential. Like every other year, there are WAY more posts showing potential production issues compared to healthy ears. It seems farmers do not normally post when things are going well, maybe out of superstition that any positive comment will “jinx” their final yields. Or maybe, some worry that positive yield posts could make the market drop.


With the corn belt being 1,000 miles long and 500 miles wide, the 50-mile radius around anyone’s farm only represents 1.5% of the entire county’s corn growing area. That is not a big enough sample size to really impact the national yield. Even if someone drove around a 100-mile radius of their farm, it would still only be 6% of the entire corn belt.

I have also found that where farmers are located often determines what they think the national yield will be too. When I ask farmers about their yields in the “I” states, and their crops do not look good, they think the national yield will be much lower than what is being reported. Farmers in most of the other states are more realistic with their national yield estimates because they recognize that their “backyard” does not matter as much within the country as a whole.

With my farm in southeast Nebraska, I know how difficult it is to watch a crop dry up and reduce yield in the field. We have often missed out on good rains, while the “I” states received good consistent weather, so the market does not go up. Our little area does not affect corn values across the country, so we must pay attention to the entire corn belt to get a true understanding of widespread crop potential and how prices will be affected.

Talking To Other Farmers Throughout the Corn Belt

Conversations between farmers across the corn belt can be tricky because information can often be misinterpreted or misleading by accident. When asked how their crop looks this year, a farmer may say, “yields are nowhere close to last year.” This can sound concerning, especially if someone is unfamiliar with the area or what last year was like.


To maintain perspective, follow up questions like, “what were your yields last year” and/or “what are normal yields for you” can help a lot. That same farmer may then say, “they raised a record crop last year and it was 10% more than normal.” Based on that additional information, normal yields and weather to that farmer may be disappointing this year. However, in reality, they may be reacting more pessimistically than they should.


Be Careful Listening to Someone Talk About Their Position

I also find that when I ask farmers how much of their new crop is sold or how much of their old crop is still in storage that it will shape their attitude toward the market. I usually find that a farmer with no new crop sold, and old crop still left in the bin, will view their crop conditions and the national yield differently than farmers who have their new crop sold or are using risk management tools to protect it. Farmers aren’t alone in this bias, most market analysts and end users will often do the same thing as well. It seems to be human nature to have a perspective that suits your hopes and wants.


Bottomline

Seeking to understand the full scope of crop conditions is good, but it is important to avoid seeking out answers that only justify your desired outcome. It is usually more profitable to gather information with an open mind to the results, which can open the door to more profitable marketing strategies and opportunities.



Jon Scheve Superior Feed Ingredients, LLC

9358 Oak Ave Waconia, MN 55387 jon@superiorfeed.com

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