You are here
Analyst: Models indicate yield hikes
As we pass the 50% harvested mark for corn and soybeans this week, we now will have our final crop condition report for yield models to be estimated from. The yield models have advanced nicely in recent weeks, with soybeans up 1.4 bu/acre in the last two weeks and corn yields up 3 bu/acre since 9/16. That means more carryout of everything as USDA needs to hike yields given the better-than-expected yields during harvest -- especially for soybeans.
Pro Ag has heard yields results across the Corn Belt, and for soybeans yields have been better than expected almost everywhere, with even the driest areas in Iowa reporting good yields of soybeans in the mid 40's. This was quite a surprise, and it's likely that yields of soybeans will need to be hiked considerably from USDA's paltry number of 41.2 bu/acre in September. Pro Ag yields models are way up at 44.3 bu/acre, so there could be hikes in bushels, not tenths, in the long awaited November report (with no report in October).
Corn yield models suggest a 163+ bu/acre crop, well above USDA's 158 bu/acre in the last report, so corn also will be up significantly from the September report. Another 5 bu/acre will mean about 450 mb extra production, taking us above the 2 billion bushel carryout and pressuring prices further.
Crop progress this week showed the soybean harvest at 77%, equal to average as the harvest week was perfect last week. Corn harvest also advanced nicely, with 59% harvested vs. 62% normally, and 20% done last week. It is interesting that both corn and soybean harvest have caught up to normal progress literally, in spite of a late-planted crop in 2013 and a late developing crop. But heat from mid-August to mid-October pushed the crop along and allowed it to develop frost-free into mid-October, essentially allowing the even very-late-planted crop to reach maturity - a miracle in its own right!
Corn conditions also improved another 2% to 62% G/E, now above average with the Pro Ag yield model up another bushel per acre to 163.6 bu/acre. That's a good 5 bu/acre above recent USDA estimates, and it also was based on a 7% improvement in crop conditions since the government shutdown. In fact, both corn and soybean conditions improved significantly once harvest started, a sign that yields are better than expected in almost the entire Midwest. The lone exception would be yields in MN and ND and parts of SD, where corn yields have been down from recent exceptional yields in 2012 and 2011. We are seeing yields more normal, and that is disappointing to producers after a cold year with the exception of September. (Could that be why corn yields are down in northern areas?)
In other crop progress reports yesterday, sugar beets are 79% harvested, equal to average, with sunflowers only 21% harvested vs. 46%. Sorghum is 65% harvested vs. 60% normally. Winter wheat is 86% planted vs. 85% normally, and 65% emerged vs. 64% normally. Winter wheat conditions dropped 4% to 61% G/E with the dry week, but still are rated much higher than last year's 40% rating. Overall, harvest is advancing nicely and conditions are still improving (probably the last condition report of the year), meaning yields are still better than expected. Pro Ag final yield models of the year indicate a better-than-average corn and soybean crop, with 163 bu/acre corn and 44.3 bu/acre soybeans - both much better than current USDA numbers (but soybean more percentage wise than corn). It looks like stocks will be building in this crop year significantly in both corn and soybeans, but USDA will be the final indicator of that with yields likely to be hiked in both crops into the Jan final report.
Pro Ag remains bearish; Final Pro Ag downside price targets are $4.25 Dec corn, $11-$11.10 Nov. soybeans, and $6 CBOT wheat. We will take 25% of corn hedges off at $4.25 Dec corn, our long held price target for harvest lows.
This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Progressive Ag Marketing believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that advice we give will result in profitable trades.