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Yield models, estimates still higher
Friday USDA will issue their first monthly crop production estimate since September (October was missed due to the gov't shutdown), and its likely field estimates for both corn and soybeans will be hiked significantly in this report as yields have been mostly larger than expected at harvest. The only question seems to be how large the yields will be for corn and soybeans, as many private estimates are pushing those numbers much higher.
Private forecasts of crop size were out last week, with Informa raising their estimates to 43.3 bu/acre soybeans (above USDA by 2.1 bu/acre) and LINN Group to 43.1 bu/acre. For corn, Informa came at 161.2 bu/acre while Linn was at 163.3 bu/acre. FC Stone raised their forecasts to 161.2 bu/acre corn with soybeans raised to 42.8 bu/acre. Note the final Pro Ag yield models showed a 163 bu/acre corn crop and 44.3 bu/acre soybean crop - both well above current Sept. USDA yields of 155 bu corn and 41.2 bu/acre soybeans. Basically, better than expected yields mean we will need to revise these yields higher in the next 2 revisions (November and January), and that is bearish! Look for more increased private estimates in the next few days, previewing what is likely to be higher USDA numbers as well.
Crop progress yesterday afternoon indicated both corn (73% harvested vs. 71% normally) and soybeans (86% harvested vs. 85% normally) are ahead of normal progress, with the big I states (IA, ILL, IND) seemingly the most ahead of normal in both crops. That indicates that we are not susceptible to much damage anymore from weather as most of the crops are already in the bin. Weather is still important, but the shift will be to South American weather as Brazil is about 50% planted now. SAM weather remains favorable as rains have returned to most of the growing areas, and temps are about average - perfect for planting.
Cotton harvest is behind normal at only 43% complete, behind the 54% normally done at this time. Sunflower harvest is also behind average at only 32% harvested vs. 61% normally. Virtually every other crop is ahead of hormal harvest progresss, with Sugarbeets 93% harvested vs. 90% normally, sorghum 75% harvested vs. 69% normally. Winter wheat is 91% planted vs. 90% normally, with 78% emerged vs. 73% normally and conditions improved 2% to 63% G/E, now well above 39% G/E rating last year. Overall, conditions are back to normal for most of the Midwest after the 2012 drought and late planting for 2013, with corn and soybean yields likely at trend or better than trend in 2013.
Weather includes rain forecast for the coming week favoring KS, NE, IA, WI, and ILL who will have above average precip, with the rest of the country getting average or below average precip. At the end of the 7 day runs, western MT and ND will get some unwanted precip - likely snow. Temps will run about average. Today's 8-14 day forecast pushes the rain into the eastern corn belt from the central belt, causing some harvest delays there.
Pro Ag remains bearish until actual crop sizes are accepted by all market players; Final Pro Ag downside price targets are $4.25 Dec corn, $11-$11.10 Nov. soybeans, and $6 CBOT wheat. We will take 25% of corn hedges off at $4.25 Dec corn, our long held price target for harvest lows of which we have traded within a .0025c this week (likely to be hit by the time you read this).
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