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2013 bumper crops?
As crops move into the vegetative development stage and the fourth of July, we are quickly realizing that 2013 is not anything like 2012.
Last year, the crops started a rapid decline in mid-June and continued all the way into August with rapid yield potential declines throughout the summer.
Instead, in 2013 we are seeing the exact opposite; yield potential started out slightly below average, and it's quickly expanding such that bumper crops are possible in 2013.
For example, corn, wheat, and soybean conditions are all improving as we near the Fourth of July. Yesterday's crop condition ratings went up for all major crops, with corn conditions improving 2% to 67% G/E, with the Pro Ag yield model up nearly 2 bushels per acre to 157.6 bushels per acre, now above USDA's projected 156.5 and trend of 157.4 bushels per acre. Yields are rapidly rising for corn, meaning this is certainly no 2013; in fact, it might be a bumper crop year finally after three crops in a row of below-trend yields!
Soybean crop conditions also improved 2% to 67% G/E, with the Pro Ag yield model rising a large 0.40 bushels per acre, pushing to 43.87 bushels per acre, now above trend of 43.6 bushels per acre and rising rapidly now! We are likely to have an above-average soybean crop as well.
Soybean planting progressed to 96% completed, now just 2% behind normal at 98% planted. The state of Missouri actually leaped to 93% done, 2% ahead of normal pace as double crop soybeans are quickly going in, as they are across the Corn Belt.
Winter wheat conditions also improved 2% to 34% G/E, with the Pro Ag yield model improving 1 bushel per acre to 44.9 bushels per acre. We are starting to lose data years in winter wheat as harvest is quickly progressing, now at 43% complete and only behind normal pace by 9%. That is allowing double-crop soybeans to go in timely, despite late winter wheat development, as weather is ideal for winter wheat harvest with cool but dry conditions across the winter wheat belt.
Overall, we have a rapidly improving crop across the country, with only HRS wheat conditions declining last week due to excessive rains in areas.
However, the HRS wheat belt forecast is for dry and warm conditions, so the soggy soils will be allowed to dry out quickly in the weeks ahead.
Make no bones about it - the downtrend is well established in grains!
We have huge acreage combined with excellent growing conditions (improving daily in weather forecasts) which will mean larger yield projections and more carryout. Current 14-day weather forecasts are perfect - cool and wet for the central and southern Corn Belt, dry and warm for the soggy northern Corn Belt. This will improve crop conditions for wheat, corn, and soybeans for the next two weeks if accurate, and will mean increased yields and production estimates for all three major crops.
This is not 2012! It's likely we will have an above trend yield in HRS wheat, corn, and soybeans in 2012 meaning increased carryout given the larger acreages.
Pro Ag expects a bounce after recent washouts in grains, and then a return to the downtrend in all grains, corn/wheat as well as soybeans.
We liquidated half of short corn positions at $5.04 for a quick 58c profit, and look to resell at $5.20 December or better. Downside price targets are $4.50 December corn, $9 to $9.50 November soybeans (down from $10 due to improving planting conditions and acreage shifts from corn), and $6 Chicago July wheat.
If you have been standing on the sidelines waiting for a rise to last summer's highs, you have been sorely disappointed in the market to date. Pro Ag doubts things will get better, though, as pricing opportunities are quickly vanishing. We hope that many producers took our advice last fall and winter to hedge multiple year hedges, with Pro Ag at 100% priced 2013, 2014, and 2015 crops of wheat, corn, and soybeans and, in some cases, have 2016 crop hedges in place as well.
Actually, the 2013 sales opportunities have quickly vanished, but the multiple-year sales are still good for 2014, 2015, and 2016 crops (catch up sales are still advised). We fear that prices will retreat permanently, and these lost opportunities will be sources of regrets for the next few years!
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