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Corn downtrend remains in place

Agriculture.com Staff 07/18/2009 @ 9:11am

It was a bit surprising to hear clients ask why grain prices rallied today. It seems as though we have become so programmed into daily losses that any rebound is seen as just plain offensive. There is nothing wrong with Friday's rebound. The forecast changed a little, as noted on the morning Kick Start page, and the markets reacted.

Pollination: Since plantings, weather has been pretty compliant. We have become programmed into the 'weather is bearish' mantra. As of last Sunday the 12th, the nation was 16% silking. We would imagine that as of Sunday the 19th, USDA will report that number around 36% or so. In other words, the last two weeks of this month are an important yield setting time. The market will be interested in any change in the weather during this time. Into this morning, forecasters took some rain out of the early next week system. In other words, weather went from a very bearish factor to a moderately bearish factor. The 6-10 and 8-14 day forecasts are currently showing below normal temps for the entire Corn Belt and a mixed precip forecast. The central and southwest Corn Belt will see normal to above normal precip while the northern areas are in the below normal precip range. So far, given good subsoil moisture levels and a moderate two week forecast we see no weather threat during pollination.

Allendale's Corn Yields: Last Friday, in this wrap up commentary, we made the point that this market is not trading USDA's 153.4 bushel yield. During Monday's broker meeting, which is available to you as an Allendale subscriber, Joe noted the current talk was that traders were thinking yields were 158 to 162 or so. This week we restarted our crop condition based yield model. It revealed, using Monday's crop ratings, a nationwide yield of 157.6 bushels per acre. USDA's numbers for yield, production, and ending stocks are 153.4, 12.290 billion, and 1.550 billion respectively. Our numbers, for comparison, would run 157.6, 12.622 billion, and 1.755 billion. At this time of year most of the yield estimates you hear from analysts are made from a plain guess. The few top tier groups, like us, will use a statistical model of some sort. There are a few weather groups, which have popped up in recent years which use sophisticated satellite modeling. They offer their services to top tier commodity analysts, corporations like John Deere, ADM, and the crop insurance companies, and also to the newer 'outside money' groups. Around three to five years ago we were first approached by the satellite modeling guys. A look at their yield guesses at that time revealed their approach was no better and in fact less accurate, than ours. Last year they approached us again and the results were the same. If they did a better job, we would happily use them. While our statistic based model is not perfect…it is the best thing we know of right now. Until we can start the closely watched Allendale Annual Yield Survey next month, the true farmer-based survey, it is what we have to work with.

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