From failure to bumper
Soybeans had an unbelievable turnaround in 2005 during the month of August, gaining almost 3 bu/acre during the critical formation month of August. I never thought we'd see such a huge improvement in a crop nationally like that again.
Fast forward one year, and 2006 once again does the impossible - a 3 bu/acre hike during the month of August for soybeans. That's a 7.5% hike in national average yield during only 4 weeks! We turned soybeans from a crop with yield potential 3% below trend on July 31 to a crop 4% above 'trend' yields in just 29 days! Remarkable.
In bushels the Pro Ag yield model rose from the year's low yield of 39.949 bu/acre on 7/31 to the year's high yield of 42.62 on Aug. 28th, a whopping 2.7 bu hike in just 4 weeks! That 2.7 bu represents a 200 mb hike in total US production, which if USDA would fully reflect it in the Sept. report would mean a 650 mb carryout instead of 450 mb. USDA's ill-timed cut in soybean production, in the last report, will all be erased in September if Pro Ag numbers are correct.
August didn't only improve the soybean crop (although this showed the most dramatic improvement). Corn yields based on the Pro Ag yield model went up from the year's low of 145.5 bu/acre on 7/31 to near the year's high yield on 8/28 at 151.05 bu/acre. Corn yields rose a little over 5 bu/acre (about 350 mb higher carryout).
During August we also learned that HRS wheat yields weren't nearly as bad as anticipated, with many yields in eastern areas better than last year (and many western areas 20% better than expected). Many Canadian areas produced better wheat than expected so that the wheat outlook is not nearly as bright as thought just a month ago. Not only is the August rain affecting 2006 crop outlooks for late season crops, but the 2007 wheat crop outlook is greatly improved with soil moisture levels restored close to normal right before the critical planting stage.
Net, nationally we have a potential bumper soybean yield in 2006 (and perhaps a record setting yield if crops continue to improve at the current pace), perhaps the second largest corn yield ever, a 5-7% below average HRS wheat crop, and we suffered a disaster winter wheat crop (about 10% below 'trend').
But what a turnaround has occurred in just the past 30 days, as we've added 200 mb production to the soybean crop and 350-400 mb production to corn. We've also added arguably another 100-200 mb production to 2007 winter wheat potential and at least 50 mb potential to 2006 sorghum production. This has taken the bullish edge off the market, and may leave us susceptible to much deeper price cuts in the next few months than we've seen thus far.
Soybeans have seen a big turnaround, with excessive soybean carryout nullifying the need to attract acres away from soybeans to wheat and corn. If Nov. beans drift to $5, that will shift acres to corn and wheat in itself, leaving no need for prices to allocate our shortage (instead they are allocating our surplus soybeans).