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Analyst: Yield models continue rise

The government was back in operation this week after finally ending the standoff between Republicans and Democrats last week, with crop conditions and weekly exports out this week. The exports continue to impress as importers see the lowest prices in years on the board, and they aggressively import crops to replenish their stocks. However, the focus of the market this time of the year is typically on the size of the crop in the U.S., not exports, as this is the most important fundamental of the market right now.  

Crop conditions and ratings were out yesterday, and we saw a 5% improvement in corn good/excellent ratings (to 60%) and a 4% improvement in soybean ratings (to 57%) from three weeks ago. This large improvement is likely the result of better than expected yields in most states, with the exception likely the northern Plains states (North Dakota, South Dakota, and Minnesota). The improvement in crop ratings hiked the Pro Ag yield models to 162.6 bu/acre corn (up 1 bu/acre) and to 44.3 bu/acre soybeans (up 0.615 bu/acre from three weeks ago). These yield hikes indicate we may have a record or near-record large corn crop, and soybean yields need to be hiked at least 1-2 bu/acre or more in subsequent reports, which will hike carryover significantly.  

Harvest is rolling along, with soybean harvest 63% complete vs. 69% normally, and corn harvest 39% complete vs. 53% normally, so we maintain our behind-normal harvest progress (the same as the planting progress/start to the season). Corn is 94% mature, just 1% behind normal for this date with 79% of Wisconsin mature, up from 43% three weeks ago. We did stay frost-free for most of the state until just recently, so yes, we did reach maturity for most crops before frost in spite of late planting! This is probably part of the improvement in ratings for corn due to the late frost and allowing almost all of the crop to reach maturity - regardless of how late it was planted (some corn planted in mid-June).  

Sorghum is 85% mature vs. 83% normally, 54% harvested vs. 52% normally, and rated 50% G/E, down 4% from three weeks ago. Sugar beets are 62% harvested vs. 66% normally, with sunflowers 12% harvested vs. 32% normally.  Winter wheat is 79% planted, right on the five-year average with 53% emerged vs. 54% average. Winter wheat ratings are quite good at 65% G/E, well above normal and the last few years, so it looks like a great start to the winter wheat crop - with adequate moisture most everywhere to germinate the crop.  Pasture conditions are rated 40% G/E, up 4% from three weeks ago due to plentiful rainfall nationwide recently. Cotton is rated 44% G/E, up 2% from three weeks ago with 21% harvested vs. 34% normally.  

Cold and dry remains the forecast for the next seven days, and that should allow rapid harvest of corn and soybeans in areas where soils are dry enough to support combines (that is all of the Midwest except the Dakotas and parts of Minnesota). The 8- to 14-day forecast dried out a bit in today's weather runs, with cold weather to continue, but the only wet weather will be in the eastern Corn Belt. That will allow soggy western areas and northern areas to dry out after 8 to 10 inches of rain in the past five weeks in eastern North Dakota and South Dakota.  

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.  With the crop progress report refocusing the market on the improving corn/soybean conditions and winter wheat starting off so well, it's likely the trend will turn lower.  

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