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.