Soybean Conditions Stabilize; Replace Hedges Now -- Analyst
Crop conditions showed little change yesterday, with corn conditions unchanged at 73% G/E and soybeans down 1% to 70% G/E. However, the yield models for both rose slightly to 170.5 bushels for corn (up 0.3 bu/acre) and 45.75 bu/acre for soybeans (up 0.07 bu/acre). This is not the change expected, and it's certainly not bullish to maintain these high yield levels the past week.
Crop progress shows that the crop is developing at normal levels or so, with 96% of the corn silking vs. 95% normally, with 54% at the dough stage vs. 46% normally, and 11% dented vs. 16% normally at this time. Soybeans are 92% blooming vs. 91% normally, and 72% podding vs. 65% normally, so they also are developing nicely.
Cotton is 83% setting bolls vs. 80% normally, and 7% bolls opening vs. 9% normally. Cotton conditions are down 1% from last week at 52% rated G/E, still much above last year's 43% ratings. Sorghum is 65% headed vs. 66% normally, and 39% coloring vs. 33% normally with 30% mature vs. 24% normally. Conditions are unchanged at 59% G/E, up from 53% last year at this time. Basically, we have an above-average crop of nearly everything in 2014. Rice conditions are 73% G/E vs. 71% last year, and winter wheat is 95% harvested vs. 90% normally so that also is going well.
HRS wheat is 6% harvested vs. 21% normally as the late start in planting has delayed harvest. But conditions remain high at 70% G/E, unchanged from last week. Barley is also still 65% G/E rating, down 1% from last week as the northwest is enduring some drought conditions (warm and dry). Barley is 17% harvested, equal to average due to the advanced stages in the west.
In the big picture, soybean yield models have stabilized near the 45.75 bu/acre mark, actually up slightly the past two weeks in spite of below-normal precipitation in much of the Corn Belt these last few weeks. The below-normal temps are leaving our yield model at high yield levels, something we didn't anticipate when we removed hedges a week ago. Prices remain at the same level or slightly higher than where we removed these hedges, so fortunately we can place them back on without losing any potential value.
We are recommending replacing hedges again in soybeans as the yield models are stable and actually slightly increasing in spite of some recent dry weather. The extended forecast continues to call for mostly normal to below-normal temperatures and mostly normal to above-normal precip - a good extended forecast. It seems the scattered rain and cooler weather is leaving yield potential of the crop at fairly high levels, and that is bearish to the market.
We thought when we removed these hedges a week ago that the yield model would decline, and the weather forecast might turn drier as dry weather seems to produce more dry weather. But so far that has not been the case. So we are recommending placing soybean hedges back in place at the current price level.
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