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Will Corn and Soybean Yield Models Continue Decline?
This week showed the first yield model declines in many weeks as corn and soybeans begin to be stressed in the Corn Belt from lack of rain. Little heat is affecting the crop, though, and that is keeping yields from declining more rapidly due to lack of rain.
Weather forecasts include mostly dry weather the coming seven days across much of the northern Plains and northern Corn Belt, with little precip forecast. However, temps will be below normal and will not put a great amount of stress on crops just yet. The southern portion of the Corn Belt and HRW wheat area will get .5 to 1" inch; locally, 2-inch rains will keep yield potential high along with cool temps. The eight- to 14-day forecast turns back to wetter for much of the Corn Belt, with .5 to 1 inch; local 1.5-inch rain amounts forecast for 85% of the Corn Belt. If that eight- to 14-day forecast verifies and the wetter forecast arrives, grains will have further to go down as pollination of corn and bloom of soybeans is occurring under very cool conditions, leaving high yield potential intact across most of the Corn Belt.
Maturity will be the next issue across the northern Corn Belt, but for now, weather remains fairly benign (although more rain is needed in the upper Corn Belt).
Crop conditions July 28 across the Corn Belt did show some deterioration from the recent dry weather, with corn conditions declining 1% to 75% G/E, still well above last year's 63% G/E but a decline, nonetheless. Pro Ag yield models did show a slight decline to 170.7 bu/acre, down less than half a bushel. But that does suggest an end to the yield rises until/unless we get more rain across the Corn Belt.
Soybeans are showing more effect from the dry conditions, with a 2% drop in the G/E rating to 71% rated G/E. The Pro Ag soybean yield model showed a 0.18 bu/acre decline to 45.6 bu/acre, still a respectable and well-above trend yield, but a decline nonetheless. This also represents the first decline in weeks, and reverses the yield rises that had been occurring. With soybean yield mostly determined in August, that means that the soybean yield is threatened more than corn in that the yield models started to decline in July - meaning this crop still could be hurt by dry conditions to finish off the year.
Crop progress is still ahead of normal, with corn 78% silking vs. 75% normally, and dough at 17% vs. 16% normally. However, northern states Minnesota (61% silking vs. 71% normally), North Dakota (34% silking vs. 52% normally), and Wisconsin (44% silking vs. 55% normally) are all behind schedule, and these states are at risk of loss from an early frost. Soybeans are 76% blooming vs. 72% normally, with 38% setting pods vs. 31% normally. Northern states are not as susceptible to frost damage in soybeans (Wisconsin 25% podding vs. 18% normally, North Dakota 35% podding vs. 37% normally, and Minnesota 26% podding vs. 27% normally).
Southern conditions improved last week, with cotton showing a 2% improvement in G/E ratings to 54% G/E, and well above last year's 45% rating. Peanut conditions also improved 1% to 72% G/E, with sorghum declining 2% to 60% G/E, still well above last year's 47% rating. Rice conditions were unchanged at 71% rated G/E.
Winter wheat is now 83% harvested vs. 80% normally, with yield coming in well above average from Nebraska north, so far. In fact, record-large yields are likely in the northern states from winter wheat. We note that HRS wheat yield potential in last week's tour was also rated record high at over 48 bu/acre, with western areas showing surprising yield potential with little moisture stress and virtually no disease or insect pressure. HRS wheat is 93% headed (equal to average), and ratings were steady at 70% rated G/E, up from last year's 68% rating. Barley is 96% headed, slightly ahead of average 95%, and ratings improved 1% to 67% rated G/E. Oats are 44% harvested vs. 35% average as warm/dry conditions accelerate harvest, with ratings steady at 64% rated G/E. Overall, the small grains are still highly rated and are not showing the declines in ratings that corn/soybeans experienced this week.
Pro Ag remains on the bearish side of the ledger, as the Pro Ag yield models remain high for corn (still near 171 bu/acre this week) and soybeans (45.6 bu/acre this week). However, with this week's decline in yield potential, it indicates that 2014 could go down as an average yield year if conditions continue to decline in to harvest. So weather in August will determine if we finish 2014 at record-large yields or just at average yields. A crop disaster at this point is probably not possible as the crop is too highly rated for it to turn out badly at this point. With weather forecasts calling for cool and wet conditions in the extended forecast, it's hard to get too bullish just yet. Target $2.90 Dec corn and $8 to $9 soybeans as the lows to remove hedges.
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