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Soybeans 'Likely to Continue Their Sharp Decline'
The crop report yesterday was bearish, especially for soybeans, as more acres were found than expected at 84.84 million, 2.67 million acres more than anticipated. At 45 bushels per acre, that is an extra 120 mb of production of soybeans - almost like raising the national yield almost 3 bushels an acre!!! That is bearish to the tune of 90c to $1.80, so the 70c decline yesterday DOES NOT take all the acreage into consideration. Instead, soybeans are likely to continue their sharp decline. Also bearish was more stocks than expected (405 mb vs. 387 expected), and that is bearish old-crop prices as well.
The corn numbers weren't as bearish, as stocks were 130 mb larger than expected, but acreage was 0.15 million acres smaller than expected at 91.64 million acres. Overall, it means an extra 110 mb of stocks in corn carryout for next year, so is mildly bearish (maybe 4c???) and the 20c decline yesterday more than takes that into consideration. However, with soybeans likely to continue their decline, corn may follow.
Wheat numbers were mildly bearish, with stocks down 13 mb from expectations (590 mb), but acreage up 0.76 million acres at 56.47. HRS wheat producers were able to plant more acres this year in spite of only a half planting season (less PP than last year). Overall, it meant an extra 21 mb of wheat stocks added to the 2014/15 bottom line, so it was mildly bearish (about 10c); prices dropped more than the fundamentals changed with the report. (Sympathy with other grains?)
Weather forecasts remain fairly benign, with below-normal precip and below-normal temps the next two weeks that will allow soggy soils to dry out and crops to develop nicely into the reproductive stage of development. This is good news for producers who have been seeing excessive rainfall recently (Iowa, Minnesota, North Dakota, and Wisconsin). Below-normal temps will allow pollination of corn and bloom of soybeans to develop nicely. That combined with the fact that crops continue to slowly improve across corn, soybeans, and wheat country are bearish weather in nature, and will continue to pressure grains.
Crop conditions yesterday afternoon continue to show improvement in yield potential, as the yield models of winter wheat, corn, and soybeans all showed slight improvements in yield potential. Specifically, corn yield rose 0.11 bu/acre to 163.96 bu/acre on a 1% improvement in G/E ratings to 75% G/E. Soybean yield potential rose to 44.93 bu/acre in the Pro Ag yield model, up 0.09 bu/acre from last week as conditions were steady at 72% rated G/E. Winter wheat yield models rose 0.015 bu/acre to 45.75 bu/acre as ratings were steady at 30% G/E. Crop development is about normal with 10% of soybeans blooming (equal to normal) and 5% of corn silking vs. 9% normally. HRS wheat is 26% headed vs. 29% normally, with ratings down 1% to 70% rated G/E – still a high rating.
Sunflowers are 91% planted vs. 93% normally, with sorghum 93% planted vs. 96% normally, so crop progress is still moving along. Sorghum conditions improved 2% to 59% G/E, with peanuts also improving 1% to 72% G/E. Overall, the country's crops are highly rated, meaning an above-average crop is coming in 2014! Winter wheat is 43% harvested vs. 48% normally at this time as harvest is delayed by wet weather the past week. However, the next two weeks are forecast to be fairly cool and dry, and should allow most of the winter wheat harvest to be completed. Overall, crop development suggests continued improvement in yield potential of all crops.
As we've said before, Pro Ag remains bearish as the crop (corn and soybeans) is improving steadily in yield potential each week, reflecting the adage that rain makes grain. We will have a buildup of stocks to about 1.8 billion bushels corn and 450 mb soybeans given a trend yield and current planted acreage (note the hike especially in soybean carryout projections). Pro Ag remains bearish grains, especially corn and soybeans, as we enter the critical July 4 time frame for crop development.
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