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Soybean yield models soar to record high
The 2013 crop continues to improve in yield potential, with the soybean crops soaring to a new record high this week at 45.13 bushels/acre in spite of a 2% decline in crop conditions (to 62% G/E). This is in sharp contrast to the ill-advised USDA report, which lowered soybean yield projections to only 42.6 bushels/acre. Pro Ag yield models suggest that the chances of a yield at only 42.6 bushels/acre are less than 5%, about the same odds of a 47.7 bushel/acre yield, which would shatter previous records by a lot! Even the Pro Farmer tour (which is typically bullish and smaller than actual yields) will find the crop is much better than current USDA projections, and also much better than last year's devastating drought-affected crop.
The Pro Ag corn yield model did decline slightly, down 0.7 bu/acre to 164 bushels/acre, still tied for a record large yield and well above USDA's ill-advised 154.4 bushels/acre crop projection (which lowered the yield potential in August by 2.2 bushels). Clearly, the USDA is anticipating a poor end to the 2013 crop (they must be forecasting an early frost to keep yields this low). And fortunately for the crop, we now have above-average temperatures forecast for the coming two weeks that should advance the crop, and keep frost at bay for now. Overall, if we have a late frost, the yield of corn could shatter the old record of 164 bushels/acre. Pro Ag yield models suggest that there is as good a chance of a 174 bushel/acre crop as there is of USDA's low projection of 154 bushels/acre. The South is looking at a mammoth large crop, with cool temps all year that make Missouri, Kansas, Oklahoma, and Texas look like the big I states of the Corn Belt (Iowa, Illinois, and Indiana) in 2013.
Pro Ag also notes that HRS wheat yields are also very good so far in the harvest, with farmers reported near-record or record-large yields in Minnesota and North Dakota, where harvest is now in full swing (18% harvested vs. 38% normally at this time). HRS wheat conditions were steady at 66% G/E, well above last year when yields were also large relative to normal. This is another banner year for HRS wheat producers, who are having another good crop year and excellent harvest weather (warm and dry). Barley harvest is also 35%, only 1% behind the normal 36%. With warm and dry weather forecast the next two weeks, the harvest should be nearly complete in record fast time! We note that barley conditions are 65% G/E, down only 1% from last week and vs. only 60% last year (which was an excellent crop).
Pro Ag notes that most other crops are also at very high levels of ratings, with cotton up 3% this week to 46% G/E, well above last year's 41% rating.
Crop progress does show a crop behind normal development, but that just means that the warm/dry weather now forecast (which is normally bullish) will help the crop mature (especially corn!) before the first frost date. Frost is the greatest threat now to the corn crop, which is mostly made in July so that dry weather should have minimal impact on yields now. Corn silking is 97% vs. 99% normally, with 52% dough vs. 65% normally and 11% dented vs. 30% normally. Soybean blooming is 92% vs. 96% normally and 72% podding vs. 81% normally. So we are about one week behind normal development. The forecast of warm weather should solve some of that problem by helping the crop mature while keeping frost at bay.
Pro Ag is very bearish right now, especially in soybeans. The chance to sell soybeans at $13 - a price higher than the average of February -- is an opportunity that comes along only once a decade or so. This crop is looking record large, and the market is trading another drought! We recommend soybean puts to anyone who likes a good investment -- including hedgers of 2013-2017 corn or soybeans, or even wheat (and sunflowers and canola). Anyone who's looking for an opportunity to lock in good prices - prices that may not be seen again for years!
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