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Harvest advances and yields surprise
Harvest is advancing, with weather expected to be mostly warm and dry the coming two weeks, which should allow harvest to move into high gear. So far, yields of corn, especially, are better than expected, but Southern soybeans seems to be doing quite well, too. Pro Ag is concerned that we will find yields much better than expected across the Corn Belt (especially corn), and that will take prices to new lows in corn and back down to the recent lows in soybeans as well. This could result in a fairly rapid decline - especially in soybeans, which rallied to the multiyear highs in Nov 2013 futures. So once they have dropped through support at $13.40, there is a long way to go down to retrace the summer rally.
Crop conditions yesterday afternoon indicated soybeans unchanged at 50% G/E, while corn conditions improved 2% to 55% G/E. Pro Ag yield models improved slightly for both crops, with soybeans fractionally at 0.006 bu/acre to 43.15 bu/acre. Corn improved 1.7 bu/acre to 162.3 bu/acre - both well above USDA figures of 41.2 bu/acre for soybeans and 155.3 bu/acre for corn. The fact that conditions are rising for corn indicates that yields are better than expected on the harvest - with yield models likely to continue to improve as we run through harvest. We could still shatter the old yield record of 164 bu/acre if harvest yields continue to be better than expected (which Pro Ag expects to continue).
Crop progress shows a maturing corn and soybean crop, with 91% of corn dented vs. 93% normally, and 40% mature vs. 55% normally, and 7% harvested vs. 16% normally. With good weather forecast the coming two weeks (mostly dry and warm), it's likely that harvest will advance nicely as we are moving into the time frame where harvest typically advances heartily. Soybeans are 47% dropping leaves vs. 56% normally, and they're 3% harvested vs. 9% normally at this time.
Sorghum is on schedule with 89% coloring vs. 83% normally, and 44% mature vs. 47% normally and 33% harvested vs. 32% normally. Harvest yields of sorghum were also better than expected, leading USDA to up soybean yields 10% in the last report! USDA is likely to need to hike HRS wheat yields 10% or more as well in the September 30 report for small grains, as harvest yields there were also record large in most cases. (They are still well below last year's yield forecast.) Sugar beet harvest is 6% vs. 9% normally, and spring wheat is 93% harvested (equal to average after a late start). Winter wheat is 23% planted vs. 24% normally, as rains across the winter Wheat Belt have delayed planting but also created a nice seedbed for germinating winter wheat.
Corn held recent lows yesterday, leading to some recovery today in corn and soybeans. But with better than expected harvest yields and rapid harvest likely to occur in the next two weeks (with mostly warm/dry weather forecast), we will likely see corn prices fall below support on their next try at recent lows. Pro Ag does not expect recent strength to last, as yield models are once again starting their march higher as harvest commences, indicating yields are better than expected across the Corn Belt. We note the soybean yield decline has ended as well after four weeks of declines due to the dry weather from mid-August to mid-September. But now that stress has ended, and yields will matter more when the combines (or lie detectors) enter fields.
Pro Ag remains bearish; Final Pro Ag downside price targets are $4 Dec corn, $10 to $11 Nov. soybeans until South America harvests, and $6 CBOT wheat.
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