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Crops keep getting better

Prices have stabilized at near $6 corn and $13.50 soybeans (if 20c corn and 50c
soybean trading ranges are 'stable'!). Can we hold these levels? Or are we due
for a sharp price decline into harvest?

Monday's crop progress numbers reinforced Pro Ag's belief that weather has been
ideal to finish off the crop season, with warm/dry conditions across the soggy
central Corn Belt which is lagging behind normal progress (but slowly catching
up?). In some sandy or dry areas this is putting some stress on certain crops,
but this late in the season this stress might push crops along in development -
and thus avoiding the biggest weather concern of all - frost! So far, weather
forecasts have called for warmer than normal conditions for the next two weeks,
which would eliminate a great deal of frost risk at this time as it would
essentially avoid any really early frost. Once we get into 'normal' frost
dates, the crop will be safe from any heavy damage from frost.

Soybean crop conditions dropped only 1% from the G/E category to 61% G/E, still
the highest rated crop since 2004 and higher than 2005 (the last record large
yield of 43.3 bu/acre). Pro Ag yield models currently suggest a new record
large soybean crop at 43.7 bu/acre, up another .45 bu/acre from last week
(another huge hike in yield potential). The soybean crop just keeps getting
better, so soybean prices will need to retreat further from the most recent crop
improvement last week. Pro Ag suspected that the ideal weather across the
country was improving the crop last week, not dropping it as so many in the
market had anticipated. Crop condition reports confirmed that suspicion, as
once again the yield model has another significant rise last week. Pro Ag yield
models have jumped from a low of 40.9 bu/acre on June 18 to 43.7 bu/acre
yesterday, a huge hike of around 3 bu/acre or the equivalent of 200+ mb hike in
production. USDA carryout will need to jump significantly in future reports as
will their yield projections. Soybean prices are likely to run to new lows as
we move towards harvest - especially if frost comes at average or later than
average dates.

Corn crop conditions dropped 3% G/E to 64%, still well ahead of last year's 59%.
Pro Ag yield models, however, changed very little at 158.8 bu/acre, down only
0.9 bu/acre from last week. Overall, corn conditions remain high and more
importantly, maturity of the corn crop continues to 'catch up' to normal in
northern Corn Belt states as warm/dry conditions continue to push the crop
along. Pro Ag doubts that late season dryness will hurt the crop much if at
all. Instead, it might just mean less drying costs for corn! In weather news,
forecast temps remain above normal for the Corn Belt the next two weeks, with rain
finishing off from Fay in the eastern US with 85% coverage of PA, KY, TN, NC,
SC, and Virginia with 0.5-1.5" locally 2-3" amounts. Also important is rain
forecast in southern MN and northern WI of 60% coverage of .25-1.5" rains that
should help these dry areas finish off the crop. Overall, weather remains
favorable to complete our record or near record large yielding corn and soybean
crops. HRS wheat harvest is speeding to completion, with record large yields
reported in MN and eastern Dakotas.

Pro Ag market comments have been so different than recent media attention -
especially the Pro Farmer Crop tour (what crop were they looking at?). It was
almost as if while the market was going up, these guys needed to find bullish
information to write so they did! That's what a professional writer does when
he needs a daily column, but it is not professional market analyst work!

While many analysts see late season dryness in the US Corn Belt, Pro Ag sees
soil moisture levels very high in most areas (exceptions are only MN, northern
WI, TN, and KY) as we close out the 2008 season. Warm/dry weather is exactly
what the majority of the corn belt needs to reach maturity of the 2008 crop, and
that is exactly the weather we are getting. The warm weather across the
northern half of the US is pushing crops toward maturity, helping them to
continue to 'catch up' to normal progress. A long, slow developing crop
typically also brings heavy test weights, something that 2008 corn and soybeans
are likely to have (and as HRS wheat growers are also discovering). Warm/dry
weather also allows the HRS wheat harvest to move along under ideal warm/dry
conditions, with nary a harvest delay from wet weather. The one major dry area
left in the US included the southeast, and tropical storm Fay is pretty much
ending the low soil moisture problem in most of the southeast including GA, LA,
AL, NC, SC, TN, and much of KY so far and through the end of this week. Even OH
and PA will get beneficial rainfall from Fay, effectively ending late season
worries about moisture deficits. Essentially, Fay is ending the last major soil
moisture deficit in the US (albeit with flooding rains in FL and parts of the
southeast)! And soil moisture levels to begin the 2009 crop year are becoming
virtually ideal across the country (recent western HRW wheat rains were icing on
the cake).

Once upside momentum is broken we could be in for another $2 break in corn (and
$5 soybeans) into harvest. This is not the time to turn bullish - this is the
time to make catch up sales on anything not yet sold for 2008 crops (and maybe
even some 2009-11 corn).

The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be reliable. The
opinions and recommendations contained are based on our judgement and do not
guarantee profits will be achieved or that losses will not be incurred.
Recommendations should not be construed as an offer to buy or sell
commodities. There is substantial risk of loss in trading futures and
options on futures.

Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about Progressive Ag's
common sense marketing services, call 1-800-450-1404 or email
Kristi@progressiveag.com.

Prices have stabilized at near $6 corn and $13.50 soybeans (if 20c corn and 50c soybean trading ranges are 'stable'!). Can we hold these levels? Or are we due for a sharp price decline into harvest?

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