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Weather locks prices-Ray Grabanski
So far, the heat has persisted and prices continue to hold at very high levels. This is in spite of a yield potential that is still indicating a crop size very close to USDA's last July report.
Temps remain mostly 3-8 degrees above normal across most of the Midwest, and prices are reflecting the persistence of the heat as prices are near the yearly highs.
Crop conditions started their decline from the heat last week, with corn
conditions down 4% to 62% G/E, and soybeans down 2% to 62% rated G/E. That provided the first significant Progressive Ag yield model drop of the year, with soybeans down .34 bu/acre to 43.4 bu/acre. That is essentially the same yield that USDA guessed at their last report in July. So, thus far, there doesn't seem to be a need for USDA to change their yield projection for soybeans in the August report. Corn yield models are also very near USDA July numbers, with the corn yield down 2 bu/acre at 158.6 bu/acre vs. 158.7 bu/acre projected in July.
While the heat is reducing yield potential for corn and soybeans (especially the southern Corn Belt heat), the crop is also catching up to 'normal' maturity after a mostly late planting season nationwide. Corn is now 65% silking, just 4% behind the 'average' 69% percent silking. Corn rated in the dough stage is now at 9%, just 3% behind the 'average'.
Soybeans are 60% blooming vs. normally 68% at this time, so the heat is advancing the maturity of the 2011 crop as well.
Actually, heat in the northern Plains and northern Corn Belt might be a good thing for crops, as it needs to advance the maturity of the 2011 crop to avoid frost risk this fall. However, warm weather during pollination of corn and blooming of soybeans is not good for the crop in the southern half of the Corn Belt. The crop needs cooler weather to allow it to reach its full potential, and here the frost risk is minimal to begin with. Only Ohio needs heat to advance the corn crop development, and that state is getting some heat the past few weeks.
Actually, the most bullish weather right now would be hot and dry in the
southern half of the Corn Belt, and cool/wet in the northern part of the Corn Belt. Instead, we have warm and wet for most of the US right now that is keeping prices pretty much in check - not rising much but not declining very fast, either. The market is simply locked in the range, looking for the next big item that can affect prices. The heat in the South is taking its toll, though, and overall the negative affect on yield potential from heat in the South is overcoming the benefits to the crop in the north in the past week.
There are hints of a change in weather pattern in the most recent 14 day weather runs, with hints at a cool down of temperatures to closer to normal as we enter the month of August. That would be of major benefit to the southern half of the Corn Belt, but not necessarily true for the northern Corn Belt, where more growing degree days are needed to push crop development along before a frost can threaten the crop. Cooler weather would be very welcome in the southern part of the Corn Belt, along with some precip. This area has been suffering under 90 degree or higher heat the past few weeks, and has also been getting less than normal precip. So, a cooler and wetter pattern there would be welcome at this point.
Look for the market to continue to be threatened by the weather for now, but it won't be long when the crop will not be at the threatening pollination stage of crop development for corn. Once we hit mid-to-late August, threats to the yield potential of the 2011 corn crop will be minimal, and attention will turn to soybeans.
It is generally accepted that the soybean crop is made or lost in August. So, the attention on the right temperature and rainfall will soon turn to soybeans.
HRS wheat crop tours are underway, and they are finding a crop that is very late in development, but does have yield potential that is still pretty respectable (only 3-4 bushel less than 2010). However, it's not made until it's in the bin, and the recent warm/wet weather is not really the type of weather that wheat thrives in. Look for more support to HRS wheat prices due to the August USDA report, which will update the actual planted acres for HRS wheat. Pro Ag expects that number to continue to shrink due to much larger prevented planting in ND than USDA has acknowledged to date.
Overall, crops are waiting for a weather pattern change to dictate prices, and so far that weather pattern has not emerged, instead leaving the warm/wet forecast intact.
Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about
Progressive Ag services, call 1-800-450-1404.