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Soybean yield potential slips, corn steady
Crop conditions yesterday afternoon showed soybeans down 4% to 58% G/E, still rated above-normal for soybean crops. That dropped the yield model to 44.6 bu/acre, still well above USDA or other recent crop tour estimates but down 0.53 bu/acre from last week, a large decline. If we experience another three weeks of warm/dry weather, its possible we could continue this decline rate and end up with a 43 bu/acre crop - but still the market is trading smaller than that right now.
The corn yield model actually went up slightly (.04 bu/acre) with the 2% decline in conditions to 59% G/E, leaving the yield model at 164.1 bu/acre. Apparently, the maturity level of the corn has advanced and eliminated enough frost risk to offset any decline from the warm/dry conditions. Many northern producers have told us they'd rather have the heat than rain right now for corn as it's pretty much going to be a decent yield as long as it reaches maturity. Rainfall would help, though, in areas that have remained dry, but the crop is also mining soil moisture in areas that still have it. There is no question, though, that 2013 is not anything at all like the drought of 2012 for corn - this may be more like 2003 - when corn remained a good crop while soybeans suffered a yield decline late in the year due to hot/dry weather.
We note that even a recent crop tour found a much better crop in 2013 than 2012, with corn at 154.1 bu/acre vs. 2013's estimate of 120.3 (they were 3.1 bushels low on corn last year). In soybeans, the tour found 41.8 bu/acre yields this year vs. only 34.8 last year (they were way low on soybeans, missing the mark by 4.8 bu/acre last year as final was 39.6 bu/acre). So the tour has a history of being pro-farmer via prices, in other words, low on their estimates. That can be seen by their final numbers being much lower than the actual tour results for each state. In MN, for example, the counts showed 181.1 bu/acre yield potential, but Pro Farmer's official estimate for the state was 163. (Why lower it?) Similar results occurred for all states, as they seemed to think maturity would not occur. But the heat to finish the year is rapidly pushing corn toward maturity!!! So corn might be better than actual yield results imply right now, including the crop-tour guesses.
Weather remains mostly warm/dry in the Corn Belt, with some scattered rain recently in states like Michigan, Wisconsin, and spreading into OH with more rain forecast for far northern areas in the coming week that will greatly aid areas where it falls. But there will be little rainfall in the Corn Belt the coming week, especially dry in Nebraska, Kansas, Oklahoma, Missouri, and the Delta that will stress these areas (although Kansas, Oklahoma, and parts of Missouri have exceptional levels of soil moisture from heavy July/early Aug. rains).
Overall, we see an above-average crop of corn and soybeans (and HRS wheat) in the U.S., with corn maintaining its high yield potential as we end the season with heat that is needed to help the crop reach maturity (its greatest risk). But soybeans are experiencing significant declines in yield potential right now with warm/dry weather (although the heat is helping it reach maturity). We have an above-average crop yet in the fields for soybeans according to crop conditions, but it is rapidly deteriorating such that it's still possible to suffer a below-average crop in 2013. But it is not a 2012 disaster, even though the market is trading it that way for now. (We matched the life of contract highs for soybeans Tuesday at $14.09 November futures.)
Pro Ag remains bearish, as the crop continues to develop in mostly good weather for corn, with some adverse weather for soybeans, which is unfortunate as we finish the crop off as we reach toward maturity. We have rallied soybeans further than anticipated, but corn has met the Pro Ag targets now at $4.90 Dec, and with the crop maintaining yield potential, corn might not rally much further (see 2003 charts). Final Pro Ag downside price targets are still $4 Dec corn, $9.50 to $10 Nov. soybeans, and $6 CBOT wheat, but it may take longer for soybeans to reach these levels (and they may need to be raised for soybeans if the crop continues to deteriorate).
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