You are here
Crop weather remains relentless
June and July were months of intense heat and dryness, while early August was marked by cooler than normal temps.
In August, precipitation amounts, although improved from the poor June/July amounts, didn't improve much. As we end the month of August, the heat is starting to resurge in the northern Plains, and we are back to normal temps across most of the rest of the country. Now, forecasts call for reduced rainfall the next two weeks, with a resurgence of heat that means above normal temps are forecast in the 6-10 day and 8-14 day outlook.
That spells trouble for the soybean crop, as yield potential never expanded during the early August 'reprieve' from drought. Instead, yield models were steady or slightly lower for soybeans, nearly steady for corn (which might be near the end of its development, for the most part, or at least its yield determining weather). But soybeans still have a ways to go, and now it appears yield potential could be trimmed by finishing soybeans in dry/warm weather again. That could take another slice off yield potential in soybeans, and there is no room for more reductions in yield in this soybean crop.
Therefore, prices had to rise, and rise they did!!! Today, we are at new all-time highs for soybeans, as they have now broken out of a flag formation to the upside. That leaves soybeans looking for a target price near $20 after the flag formation, as it extends another $4 upside potential (equal to the rally thus far). That brings us to a technical target of $20 soybeans, and it could be interesting how quickly we might make that mark now that we are in uncharted, new high territory.
Remember how fast HRS wheat rallied when it broke above $14? Within a few weeks, we were trading $24-$25, as once you are in uncharted waters, markets can rally quickly!
Today, soybeans actually closed lower after gaining over $1 in the past three trading sessions. Perhaps that's the way soybeans will trade now, gaining $1 and then setting back <10c in corrective trade? If so, markets could rally quickly, and of course, the end is always a blow off top (like 5-7 straight days of higher markets).
Pro Ag yield models for corn have stabilized at near 134 bushels/acre, the same yield projected for the past 5 weeks (within 1 bu/acre).
However, soybean yield models run by Pro Ag indicate a continued decline in yield potential, losing about 1.2 bu/acre in the past 5 weeks. That's another 100 mb of lost production, and with current demand it's a 100 mb that we can't afford to lose.
So, price outlooks for soybeans have continued to improve the past month, and now with warm/dry weather forecast to finish out the growing season, we could see further declines in soybean yield potential. Does this lead to an explosive market? With new all time, historical highs in soybeans already on charts, it could be an interesting few weeks leading up to harvest!
If soybean prices rise, it could drag corn and wheat (kicking and screaming) higher. However, Pro Ag notes that winter wheat states (TX, OK, and KS) are forecast to get 1-2" rains across the HRW wheat belt the coming week; that will provide perfect moisture to germinate newly planted winter wheat this fall. No, the drought wasn't in wheat country this year; that's why USDA is projecting wheat prices to average only 10c more than corn all year, in 2012-13. It could be a weird marketing year for wheat and corn producers, as essentially wheat is "corn2". And we will figure out a way to end the year with some stocks on hand; the only question, though, is how high prices have to get to limit demand.
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 byvProgressive 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 the advice we give will result in profitable trades.