Corn yield drops seen
While July was a very hot month in 2011, August did not continue that heat, effectively leaving a 2011 crop that is likely not nearly as damaged as the big drought years of 1980, 1988 or similar type years.
Instead, August weather cooled down to allow crops to fill moderately well in spite of below normal precip across most of the Midwest. It was the limited rainfall that hurt crops in August, and possibly reduced crop sizes a few bushels in corn and fractionally in soybeans based on yield models.
While many crop watchers want to see further reductions in yield estimates for both corn and soybeans, so far the anecdotal evidence suggests corn could see further reductions, but soybeans may not. Pro Farmer's tour recently completed suggests another 5 bu/acre reduction in corn yields down to near 148 bu/acre from USDA's August projection of 153 bu/acre. But Pro Farmer's soybean estimate is actually up 0.4 bu/acre from USDA's 41.4 bu/acre August estimate, with Pro Farmer at 41.8 bu/acre.
While these estimates are smaller, the Pro Ag yield model based on crop conditions indicate a 158 bu/acre corn crop, and over 43 bu/acre soybeans crop. The yield model also suggests that current USDA projections are already 1 standard deviation below the yield model, a result that only has about a 30% chance of being correct. Any further lowering of crop sizes from this point might be premature according to that data.
Heat during July, however, could have taken a bigger hit on corn potential yield than many anticipated (and more than the yield model suggests), as heat during July can have a major impact on corn pollination. Especially expected to be adversely impacted is the southern Corn Belt, where heat in the HRW wheat area was severe. The impact to yields in this area was likely very significant, with many corn crops likely chopped for silage to feed hungry animals (where $8 corn is too expensive to feed?).
However, the cooler August weather could leave USDA's soybean yield estimate on the low end. After all USDA's August yield estimate came right when heat was ending in the corn belt, with the eastern Corn Belt actually spending the rest of August at temps below or near average. The intermittent showers that accompanied August could have left soybean yield potential much better off than anticipated, and while soybean prices have surged higher in August, perhaps the yield potential wasn't cut anymore?
The market also must deal with a time horizon which is inching closer to harvest. Will prices maintain current high levels as we move through harvest? That would be unusual indeed, especially with prices hovering near record high levels for corn. Won't it be tempting for farmers to sell nearly all excessive production not already marketed?