The Pro-Farmer Midwest Yield Tour is under way and several states have been observed and yields estimated. You can take a gander at day three of their tour, in Illinois, at this link. Here is a pictorial representation of the yield estimates from The Van Trump Report, with their Iowa observations underway today:
I’ve been under the opinion that Indiana and Ohio were going to be the center of the best corn bulls eye this year and this graphic certainly supports that…however take a look at Illinois. Earlier this summer, most folks I speak with in Illinois were not as bullish on the corn crop, or at least, corn drying opportunities. That talk has changed the last several weeks as farmers are calling retailers and booking more grain drying gas. That’s been the theme in the southern two-thirds of Indiana and western Ohio, too.
Now Take a look at the anticipated yields…we’ll see what the Iowa numbers show (I will be surprised if they are better than Illinois, Ohio and Indiana, but Iowa has to be the corn acres leader) but you can see why the estimates of an all-time record harvest look to be spot on.
The biggest question for our (and your) interests will be how much drying will be needed. The sheer volume of the crop will mean a good amount of propane gallons will need to be used for drying across the grain belt. I’ve been following the ProFarmer twitter account as they have been tweeting yield reports and other notes during this scouting trip, and there was one tweet that caught my attention. Here is what it said:
“Crawford County, Ohio has an estimated BLACK LAYER date of September 29th. Yield estimate of 201 bushels per acre.”
I shared that with one of my clients yesterday who has operations in Ohio and his comment was “That would be just like 2009.” There may have been a hint of reverence of awe in his voice, as the grain drying year of 2009 was certainly one to be remembered. It was big and lasted a long time.
One more crop related note…this harvest is going to be a bin-buster. Corn prices are at their lowest levels in years right now and this USGAnet.com article adds another bullish chip onto the grain drying table. It’s titled ‘US Grain Crop Likely to Outstrip On-Farm Storage’.
“With corn and soybean prices languishing at their lowest levels in years under the weight of projections for record-large harvests this fall, American growers look set to try to store rather than sell as much of this year’s supplies as possible.”
While the crux of the item talks about the lack of storage options, it raises a good point; there will be a chunk of this harvest that is not sold this year, or that will be sold well into the winter…and that corn will need to be dried down even farther than the 15 to 16 percent range you need to sell it, which means more propane used for drying….
WEATHER: On February 28th, I began to write about how the weather forecast analogs were lining up in a 2009-2010 way and I have written about the 1994 and 2009 corn crops several times since then in relation to what I was seeing and feeling as it related to this year’s crop. It will be interesting to see if the corn drying winds up following a similar track this year, but I am betting on it. So is Meteorologist Joe Bastardi of Accuweather.com fame, and someone I subscribe to. He just wrote this snippet this morning:
“As of this writing, the closest two winters to plan this winter around would be 2002-03 and 2009-10. By that I mean I would be looking at what your company would have to do to prepare for a blend of those winters.”
How about 1st Quarter 2015? I have been less bullish on that time period this summer…but I will present some data for you to consider now.
This first graphic is from a Japanese based weather model and the results were produced last year at this time, as it relates to their winter weather prediction for the United States:
I know you remember that it was cold and this map is darn near an overlay of what turned out to be our recurring ‘Polar Vortex’ pattern. You had the ‘Omega Block’ going on near Alaska; a North Pacific blocking ridge in the shape of the Greek letter Omega. Here is a graphic representation of what that is and what we had most of the winter:
So I would say that Japanese model FLAT NAILED what we wound up experiencing last winter…and by the way, ridge and trough pattern has been prevalent this summer…with several parts of the country experiencing the coolest July’s on record…and the near ideal growing conditions for corn will show up in the yields in the next two months.
Now that we have established that this Japanese model at least has Buster Douglas-type ‘one off’ punching power, what does it have to say about the upcoming winter? Here you go:
Compare that graphic with this 180 prediction from the aforementioned Bastardi, from his WeatherBell.com site, which has been their winter forecast dating back to April and the computer modeling data continues to support the same conclusions:
One thing the WeatherBell team does is to create ‘Independent Consensus’. I know that is oxymoronic, however their team of meteorologists look at the computer models and evidence at their disposal and they interpret it…much of the interpretation is the same, but there are variances. They come up with their feeling on the coming year then they go back and search history for the years most analogous to their conclusions and they weight the predictions.
Here are the years they feel are most likely to match up with this year:
Here is their consensus temperature prediction overlay for January:
Thus, these are the reasons why I am becoming a bit more bullish on 1Q15, or certainly at least January 2015. If we have the type of grain drying year I am expecting we will have (a big one) AND the winter turns out to be similar to that of what the Japanese and WeatherBell models are projecting, then we’re going to be in for another round of bedlam in the propane industry. And ‘OH BY THE WAY’…the Farmer’s Almanac is out and it is calling for a ‘Super Cold’ winter for the eastern two-thirds of the ‘refridger-nation’ (their term). Recall that they did nail last winter and historically, they’ve been right (on a macro level) far more often than they have been wrong.
Last thing for this missive; inventories are building and we have a chance to head into October with more inventory on hand than ever before, or at least since the 1980’s which is as far back as the data goes that I have from the EIA. The propane industry doesn’t have a supply problem…but it very much has a supply where and when you need it problem…it did a year ago and it will again this year.
Did I remind you not to be short 4Q14? Add January 2015 to that list, too.
As always, thanks for reading.