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Analyst Sees Favorable Weather Pressuring Crop Prices
We’ve recently had a dramatic change in the weather forecast for much of the Corn Belt, as we started September with much-below-normal temperatures for much of the area, especially the northeast Corn Belt.
But in the past two weeks, that forecast has changed from one of below-normal temps to above-normal temps. This warming is extremely important to helping get this 2017 crop to maturity in many northern areas. Without it, it’s likely that if early September weather were to continue into midfall, that frost would damage many crops and reduce the crop size of the 2017 corn and soybean crop. Instead, it appears that the warming trend will help the crop maintain its current yield potential – which is basically about an average crop (trend).
Today is the September USDA report which was released at 11 a.m., with the average trade guess expecting a drop in corn yields from 1.3 to 1.7 bushels per acre (depending on who you listen to). They also expected a drop of soybean yields from 0.7 bushel per acre to 0.6 bu). Pro Ag yield models have risen since the August report by 3.28 bushels per acre in corn and 0.6 bushel per acre in soybeans.
Instead, we expected an increase in yields, say 1 bushel per acre in corn (to 170.5 bushels) and 0.1 bushel per acre in soybeans (to 49.5 bushels per acre). So we are not expecting the same bullish report that the trade seems to anticipate (they anticipated a bullish report in August, too, and instead it was bearish).
The numbers USDA reported were higher, as we expected, with corn yields up 0.4 bushel an acre to 169.9 (2.1 bushels higher than expected). Soybeans were raised 0.5 bushel per acre to 49.9 bushels per acre (1.2 bushels per acre higher than expected). Ending stocks of corn and soybeans were higher than expected as well (202 mb in corn, 38 mb in soybeans), so prices dropped on the report.
Working against the bulls is the forecast we talked about above, which now calls for above-normal temps for the next two weeks – the critical time to avoid a frost for this somewhat late developing crop. The switch from below-normal temps to above normal has taken place over the past week or two, and is a fairly bearish development as it appears that any damage from a frost threat is becoming more and more limited.
Now both the next seven days and the eight- to 14-day forecasts are for above-normal temps in all the Corn Belt. Precip the next seven days is below normal for the central and eastern Corn Belt, and normal to above normal for much of the western Corn Belt and the western U.S. Precip in the eight- to 14-day period is for above normal in the northern Corn Belt, and normal to below normal elsewhere.
Overall, this is a favorable forecast.
Crop conditions out yesterday afternoon were steady with corn at 61% rated G/E, with the Pro Ag yield model up slightly (0.06 bushels) to 171.23 bushels an acre, up from USDA’s August report of 169.5 bushels per acre.
Soybean ratings declined 1% to 60% G/E, with the Pro Ag yield model down 0.16 bushel an acre to 47.33 bushels per acre. Apparently, it is a bit dry in some soybean areas, and that is causing some stress late in the filling process.
Crop development is moving along, with corn 96% dough stage (1% behind normal), and 75% dented (6% behind normal), and 21% mature (10% behind normal). Corn is 5% harvested (1% behind normal). Soybeans are 22% dropping leaves (3% behind normal).
Cotton bolls are 34% opening (6% behind normal), with 9% harvested (5% ahead of normal). Cotton is rated 63% G/E, down 2% but still well above last year’s 47% rating. Sorghum is 74% coloring (on schedule), and 35% mature (4% behind normal), with 24% harvested (3% behind normal). Sorghum condition improved 3% to 66% rated G/E, which is actually 1% better than last year’s record-large yielding crop.
HRS wheat is 95% harvested, 8% ahead of normal, with barley 96% harvested (3% ahead of normal). Oats are 96% harvested, 1% behind normal. Winter wheat is just getting started with planting, with 5% planted (1% behind normal).
Soil moisture declined significantly last week, with subsoil down 5% to 57% rated adequate/surplus while topsoil declined 7% to 55% adequate/surplus. These are both well below last year’s ratings for this time (76% topsoil and 74% subsoil).
With the crop coming through with basically a near-average 2017 crop in wheat, corn, and soybeans (it appears), it makes those of us at Progressive Ag feel a lot better having marketed 130% of a normal HRS wheat crop in early July at an average of $7.97 Sept. for 2016 and 2017 crops, and $6.83 Sept18 for 2018 HRS wheat. We also sold 70% of a corn crop for an average of $4.09 Dec, and 40% of a soybean crop at $10.23, basis the Nov17 futures contract. Since most of these sales were done within eight to 15 days in July, it was a lot to sell at once. But then again, that is when the market topped for 2017. So, therefore, that was when the opportunity presented itself.
Ray Grabanski can be reached at firstname.lastname@example.org.
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top Ranked marketing firm in the country the past 8 years. See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com.
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