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Did heat hurt pollination?
Corn markets rallied sharply Tuesday on anticipation that heat has hurt pollination of corn in southern areas where the heat has persisted through the last half of July. Its likely there is some impact from heat, but the question is, how much???
Crop condition numbers still suggest a decent corn crop near trend yields, with 62% still rated Good/Excellent and the Pro Ag yield model indicating a 159.6 bu/acre crop, still 1 bu/acre higher than the recent USDA July figure. So while it is accepted that heat can hurt pollination of corn (and provide significant damage to yield prospects), the crop condition rating continues to suggest otherwise. One reason for this may be that most areas still have adequate soil moisture which kept crops from being under any drought stress, so while heat in the past has caused significant yield losses when accompanied by lack of soil moisture. That keeps the crop looking good in the field, but it might not necessarily mean that yield prospects are as good as the corn looks. Pollination problems often show up only at harvest, or if people look closely at their corn, they might notice some missing kernels as the heat would eliminate the pollination of some of the corn.
While missing kernels can be alarming, the actual yield impact might not be as large as simply counting kernels, as the corn plant can make up somewhat for loss of kernel pollination in making larger kernels in the remaining cob. So just counting kernels in the cob may also not be an accurate picture of actual yield loss.
The only way we will really know the impact of heat on pollination, and thus eventually yield, is to harvest some of the crop and record the impact on yield. That will make the next few weeks extremely difficult to trade, as we might be operating 'in the blind' about actual yield impacts from heat during pollination.
As we turn the page to August, it might be a completely different story for soybeans as the forecast has turned to a normal/below normal temps and above normal precip forecast -- perfect for filling and podding out soybeans. This could boost the soybean yield, and thus provide some cushion to bullish corn traders who are buying corn by the bunches. We might yet end up with an above average soybean crop, with the cool/wet forecast extending out into the 8-14 day forecast as well (that is, as long as it doesn't bring in an early frost in northern areas).
One thing is certain: Current prices are allocating the short crop year from 2010 across grains, as weekly export sales and shipments have slowed to well below the normal expected pace if we were to meet our current export projections. Wheat, corn, and soybeans have been disappointing to date for the impact of all exports. We just can't seem to find buyers for grain at current prices.
Perhaps in the end that is what is important, the demand side of the equation after all is at least half of the price discovery mode. With demand drying up, maybe it won't even matter if corn yields drop as low as 150 bu/acre, as some private forecasters have already predicted. Instead, at current prices of over $7 Dec corn futures, perhaps we are already overpriced by $1 or more - even with a 150 bu/acre yield???
Pro Ag considers this a good time to be a seller of grains, especially as we near the all time highs in corn (and a potential double top). While it now seems likely that corn will test old highs, it could be some interesting fireworks that develop as we go into mid-August weather.
Ray Grabanski is President of Progressive Ag, a marketing and risk management firm for farmers located in Fargo, ND. For questions or comments, or if you are interested in more information about Progressive Ag services, call 1-800-450-1404.