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Soybeans still losing yield potential

Ray Grabanski 08/30/2012 @ 12:33pm President, Progressive Ag www.progressiveag.com

Soybeans are still losing yield potential, with this week's Pro Ag yield model dropping 0.9 bu/acre to 36.1 bu/acre, well below the level at the beginning of August when USDA put out the 36.1 bu/acre estimate in August. So far in August, the Pro Ag yield model has dropped 2 bu/acre, which represents another 150 mb lost in production since the month began. Which brings up an interesting question: Will USDA lower soybean yield potential another 2 bu/acre in the Sept. report to 34.1 bu/acre? That, Pro Ag believes is possible, and if it occurs will bring on another dynamic price burst.  

Contrast that with corn, where the yield model has been stagnant at 134 bu/acre for the past 5-6 weeks. So the conclusion that can be reached based on yield model information is that the corn crop has stabilized as the growing season is virtually over for corn. But soybean yield potential might still be being determined for another 2 weeks, and so far in August we have had less than normal precip. Temps were cool to start the month, but now we are back to above normal temps that are probably continuing to trim potential soybean yields. The other problem soybeans inherited were virtually no stored soil moisture by the time the critical month of August began, as June/July were deathly dry and warm, and depleted most soil moisture across the corn belt. So when we had less than normal precip on sporadic rains, the crop suffered.  

So soybean yield potential has declined considerably during the month of August, and therefore the soybean prices had no choice but to go sharply higher again in August. While corn prices (and wheat or corn2) have stabilized in August, soybean prices have surged higher. We closed today at about $17.50 Nov. futures - the highest close ever for soybeans in the history of the world! And we might not be done yet!

Which brings up an interesting situation as we enter the fall, and harvest of corn and soybeans (which is going to occur 2-4 weeks early). So can prices continue to rally as we enter harvest, even though we are already at all time highs in price? Or do we get the typical harvest break, as farmers harvest crops and sell at prices they've never seen before in the history of the world?

The answer to this question might be determined by actual harvest yields: are they less than expected? Or will harvest yields be better than expected? Already we are 6% harvested in corn nationally in the Monday, Aug. 27 report.  But then again, the worst corn in the country should be the 6% harvested now (as if its harvested early, it was probably pushed due to drought impacts). So up until now the yields have been disappointing, but will that continue for corn as we move into the crops that developed over a full season? And what about soybeans? Did the cooler weather help yields recover somewhat in August? Or was the lack of moisture the definite, determinate factor for yield?

Many questions, few answers at this time. But one thing is certain: selling corn at $8 or higher and soybeans at $17 or higher should always be a good decision. Who is going to be able to afford to continue using these crops at these price levels? This might be especially true in corn, as our history of trading above $8 corn is limited, and the use of corn for ethanol is supported by the Renewable Fuels Standard that can be changed by politicians at the stroke of a pen. For soybeans, give the continued limited supply and losses in August, perhaps price is not quite done doing its job of allocating this food based product?

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