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Is the drought busted?

Ray Grabanski 08/16/2012 @ 10:47am President, Progressive Ag www.progressiveag.com

The U.S. crops have been devastated this summer by drought, with very dry/hot weather in June and July.

The inclement weather tanked corn yields by 25% below 'trend', and dropped current USDA soybean estimates to 36 bu/acre, well below trend of 43.5 bu.  So, the terrible US weather in June and July, with record heat and about 50% of normal precip across much of the Corn Belt devastated yield potential of the US crop.  

However, since August temps have been cooler than normal, not just by a little bit, but 4-12 degrees below normal.  There is no question that the heat part of the 2012 summer drought has ended, as the forecast the next two weeks is for well below normal temps.  If that is true, August will go down as cooler than normal.  So far, though, the rainfall that usually accompanies cool weather has not occurred.  Sure, we have had more rain in August than in June or July, but it hasn't necessarily been wet, either.  Some states have had great weather, with rains making soybean fields resuscitated and yield potential restored in many cases (like the northern Corn Belt states of MN, SD, and ND).  

However, the question remains of whether or not soybean yields are actually improving.  So far, in Pro Ag yield models, corn has increased a few bushels the past few weeks (which is surprising because most believe corn cannot be helped), but soybean yield models are still indicating yields below 38 bu/acre (about 37.7 bu/acre).  USDA yield projections are even lower as of August 1, at slightly more than 36 bu/acre.  But has it improved in August?

The question is important, as if soybean yields can improve from August forward, then that frees up SAM acreage to be planted to corn.  If US yields can be revived to 38 bu, or even 40 bu/acre in soybeans due to ideal weather in August, it could have a tremendous impact on the supply/demand fundamentals of the market.  And of course, the same impact on prices.

While many were talking about $10 corn and $20 soybeans in late July/early August, the change in US weather since August 1 might be making those projections a moot point.  Cooler than normal weather accompanied by intermittent showers could have a tremendous impact on yield potential.  

So, while the whole world is finally talking about the terrible drought of 2012, and it's finally making front page news in major media outlets, sometimes that is the final straw in the bull market.  The old saying is once the grain markets become in the front pages of major media outlets, the market has probably topped!

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drought may be busted, but . . . . 08/16/2012 @ 2:23pm In my neck of the woods we are seeing occasional light rain (averaging about a half-inch each week or ten days), and indeed the temps are lower than recent months, BUT now I am seeing conditions favorable to SDS development. In recent years, our yields have increasingly been ravaged by SDS (favored by cool, wet weather). This year, at least through July, it was not a problem. Now I am seeing SDS developing, and it is gaining steam rapidly in these cool, damp beans, yet the soil is still fairly dry, and thus bean maturation is slower than normal. I see this fungus as a new threat to bean pod development, while the number of pods on plants was capped by reduced plant growth during the drought (a lot of flowers just did not set). I would love to sell beans now, BUT I simply cannot predict with any confidence how many beans I will harvest - around here we normally get around 50 bu/A. Two years ago SDS limited us to around 20 bu/A. SDS is becoming wider spread each year - it will only get worse, and it thrives in weather like we are having today. So, I am not sure I'd rule out $20 beans just yet.

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