Bearishness 'Piling Up' as Corn, Soybean Yield Potential Rises
The soybean and corn yield potential rose again sharply this week, with the bearish news piling up in the market. It looks like it will be a record-shattering year for yields in the U.S, and that is pressuring markets big-time.
Crop conditions rose 1% in corn to 76% G/E, and our yield model hiked almost 4 bu/acre to 170 bu/acre! Soybean conditions were steady at 72% G/E, but our yield model rose 0.3 bu/acre to 45.6 bu/acre, so this is very bearish. Already the corn yield is at 170 bu/acre, and it is rising fast! Overall, the other crops are also improving in yield potential, so this is a very bearish situation.
Corn silking is at 34%, slightly ahead of normal in spite of a relatively late planting period. Soybean bloom is at 41%, slightly ahead of normal 37%. So the crop is also developing slightly ahead of normal as well. This combination of early development and improving conditions is a deadly one for prices.
Pro Ag can hardly be bearish enough, as prices will have to retreat sharply based on adding 4 bu/acre or 300 mb of production of corn in just one week. That is so bearish it is hard to put it into words, as rarely in 10 years does the yield model jump so much in just one week. Holy cow is all you can say!
We note that USDA's Friday, July 11 report was bearish, but not as bearish as it could have been as they raised soybean demand 90 mb (40 mb crush, 50 mb exports) to keep carryout at 415 mb. Still, that is a large carryout as USDA recognizes that soybean prices will be lower and will attract demand (average price $10.50). However, with that large a carryout, USDA might have to lower that average price as the futures price drifts lower since $10.50 is a high average with that large a carryout.
Corn carryout was hiked to 1.8 billion bushels in spite of lower harvested projected acreage. Wheat carryout was hiked to 660 mb as feed use was cut with corn prices drifting so much lower. That was 86 mb larger than the June report, and was probably most surprisingly bearish wheat rather than even corn and soybeans.
As we've said before, Pro Ag remains bearish as the crop (corn and soybeans) is improving steadily in yield potential each week, reflecting the adage that rain makes grain. Pro Ag remains bearish grains, especially corn and soybeans, as we go through the critical reproductive stage for crop development with no threat to crop yield potential.
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