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Short crops, what now?

07/26/2012 @ 3:42pm

The crop is far enough along that many analysts are out in the fields estimating yields.  Even though it is still July, there are crop tours crossing the heartland already.  Additional tours are scheduled for the month of August. 

With smartphones and Twitter, there are more pictures than ever of corn fields and sample ears.  The groups wandering through fields right now seem to be disappointed in what they see.  Of course, anyone would be depressed with the sun beating down on them and a heat index of 105-110 degrees.  It’s not good for a human and it’s not good for a corn plant.

Tomorrow there will be a crop estimate released during trading hours, but it will not be based on field/farmer surveys.  Next week (with the new month), the slew of pre-report estimates begins! 

Much of the discussion this week still centers on rain and forecasts.  The 100 degree heat seems to have left the Midwest, but the forecast still seems to have above normal temperatures and below normal rainfall.  There are on-going discussions regarding demand, but it is hard to pin down the extent of reductions that will be required.  Right now, it is easy to see ethanol production has slid during the month of July, as have corn exports. 

Soybean demand, on the other hand, seems to be much less price sensitive.  Exports this morning were larger than expected.  With crush also running strong, there could be a case for increasing old crop bean demand.  New crop remains a rationing situation—price will need to restrict demand enough to wind up with a minimum level of carryout.  Buyers of protein will need to see if they can wait until the South American crops are harvested in the spring of 2013.

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