Grain markets break hard, but not broken
Last week provided good rainfall over the southern two-thirds of the Corn Belt, with KS, OK, MO, IA, ILL, IND, OH, MI, KY, and PA all benefitting from another week of normal to above normal rainfall.
This caused crop conditions to remain almost steady (only 1% declines in corn/beans), with Pro Ag yield models suggesting a 1.9 bu hike in corn yield and 0.2 bu/acre hike in soybean yields.
That leaves us just below 'trend' yields in both corn and soybeans, so about an average US crop (above average in the east, below to well below average in the west/northwest). But we still have a long ways to go to crop maturity, with corn yields still impacted by weather and the entire podding period left in soybeans (the yield determining time). The western corn belt is still critically short of moisture, and no one knows yet how much pollination has been damaged by the 90-115 degree temps the past 1-2 weeks.
The next 5 days will bring scattered rains to the western corn belt, with 25% coverage of .1-1", locally 2-3" rains (heavier rains in southern MN/WI) that will help wherever the rain falls. The eastern Corn Belt again gets the benefit of the most rain, with 75% coverage of .25-1", locally 1.5" rains (about normal precip) that will keep the eastern belt well soaked and in great shape. Temperatures will be about normal across most of the Corn Belt, with the only area with above normal temperatures in HRS wheat country.
HRS wheat country has been devastated in 2006, with crops quickly shrinking to about 20% below 'trend' yields, a disaster that rarely occurs across an entire crop. In contrast, HRW wheat yields in 2006 were down about 10% from 'trend', a disaster but only half as bad as HRS wheat's debacle. Corn and soybeans are maintaining near 'trend' yields so far, but precip amounts have been light across the western corn belt. With much of the western belt at soil moisture deficits from 1-5", it is critical that more rain fall in the near term.
Unfortunately, that rain is not forecast to fall in the next 2 weeks, with this morning's weather runs taking some precip out of the western corn belt over the next 2 week period. It also adds some heat back into the western Corn Belt so that more stress will occur in this area. The forecast for the eastern corn belt is mostly normal temps and precip, so the eastern corn belt appears to be the bright spot for 2006 (above trend yields likely).
Pro Ag is torn between the continued unfolding disaster in HRS wheat country (where HRS wheat yield potential has plummeted in the past few weeks) and the relatively high prices of wheat right now. With HRS wheat harvest right around the corner, it could be that wheat prices slip lower in the near term, and then have a nice post-harvest rally following the 'harvest break'. However, there was little 'harvest break' in HRW wheat, and with HRS wheat crops likely to be much more disappointing than winter wheat, this harvest shouldn't take long. Corn and soybeans continue to 'hang on' to current yield potential, but perhaps its just a matter of time before the crop stress catches up with us???