Yield models suggest bumper crop
Monday afternoon's Crop Condition report continued to show improvement for most Corn Belt crops. This was in spite of a 2% decline in crop conditions in the three major crops. Crop conditions released yesterday afternoon were deceiving in that the conditions dropped 2% in corn (to 66% G/E), soybeans (to 65%), and HRS wheat (to 70% G/E). But the Pro Ag yield models went up for corn 2.21 bushels per acre to 162.4 bushels per acre and up 0.21 bushels per acre in soybeans to 44.52 bushels per acre.
So, apparently conditions normally drop even faster this time of year (consider last year for example). Prices are starting out higher in overnight trade, but Pro Ag expects that the smart money will sell a rally today, with a potential downside reversal possible by late in the day. Pro Ag notes that we now have a corn yield model that is 5 bushels per acre above trend yields, and 6 bushels per acre above the USDA recent yield estimate! So unless we start to rapidly deteriorate this crop, it looks like we will have a bumper crop in 2013! That is bearish, and we are quickly running out of time to hurt this crop.
Soybean conditions declined 2%, but are much higher than last year's condition at this time of only 34% G/E, with this year's number at 65% G/E. The soybean yield model is now above trend by nearly 1 bushel per acre at 44.52 bushels per acre, and even above USDA's current projection of 44.5 bushels per acre.
With conditions still improving for yield potential, it's likely that soybeans will show continued improvement with good weather forecasts (especially for the eastern Corn Belt, where temps will be mostly below average and precip average to above for the next two weeks). Pro Ag notes that while progress still lags the normal pace, with the recent warm weather, we are catching up to normal development. We note that winter wheat harvest is now only 4% behind the normal pace. So, we are quickly catching up to normal, and allowing double crop soybeans to go in the ground in mostly a timely manner.
Weatherwise, we have a forecast of cooler conditions today, but drier as well across the western Corn Belt for the next two weeks. The dryness in the western Corn Belt (including states of Nebraska, Iowa, the Dakotas, and Missouri) will start to become a concern as these areas are in need of rain in this period of rapid use of moisture. The crops including both corn and soybeans are growing rapidly now under the July sun, and there is a need for moisture to keep this crop improving in yield potential.
Pro Ag was a big seller of grain at $12.89 Nov. soybeans, $5.22 Dec. corn, and $6.85 Sept. CBOT wheat. We now are 100% priced 2013 to 2016 soybeans and corn, and 100% priced in 2013 to 2015 wheat. Pro Ag remains bearish as crop growing conditions continue to improve, meaning a bumper crop is not just possible, but becoming likely in 2013. Downside price targets remain $4.50 Dec. corn, $9-$9.50 Nov. soybeans, and $6 Chicago July wheat.
We also note that the late-planted crops (many of which were planted after the final crop insurance planting date) are looking very good right now, and with the recent warm and mostly dry weather were allowed to grow very quickly, catching up in a sense to near-normal crop development for many areas. That is taking the frost risk from this late planting of crops away, although this will remain a concern unless the crop season continues to accelerate crops in development. Pro Ag sees a lot of bearish news in this market, at a time when most farmers are still bullish on the old news of the late planting and the prevent planting that did occur. But we note that foreign crops (Russia for example) are also experiencing bumper yields of most crops. This is no time to get bullish! Carryout projections of corn and soybeans will likely triple in the coming year; once we get past the old-crop tight stocks, prices will retreat very quickly!
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