While July was a very hot month in 2011, August did not continue that heat, effectively leaving a 2011 crop that is likely not nearly as damaged as the big drought years of 1980, 1988 or similar type years.
Instead, August weather cooled down to allow crops to fill moderately well in spite of below normal precip across most of the Midwest. It was the limited rainfall that hurt crops in August, and possibly reduced crop sizes a few bushels in corn and fractionally in soybeans based on yield models.
Recently, grain markets have received all bullish news, with media reports of smaller than expected yields likely for corn and soybeans in 2011, and USDA's August report numbers that were shockingly low for corn and soybeans.
While USDA did not want to repeat last year's mistakes (a higher crop estimate in August, only to have to lower it all the way into the final Jan report), the rest of the world seems to be content to echo their sentiment. We wonder about the wisdom of being bullish grains at $7.40 corn futures!
By the end of the day Tuesday, the corn market was limit up. Why?
Corn markets rallied sharply Tuesday on anticipation that heat has hurt pollination of corn in southern areas where the heat has persisted through the last half of July. Its likely there is some impact from heat, but the question is, how much???
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
The market now is dictated by three main items: Weather, weather, and weather!
Grain prices have rallied back after the break from the June 30 report. That data showed more corn acreage and stocks were higher than expected, with prices at the levels they were at before the report.
This is surprising, as the crop condition numbers indicate an improving corn and soybean yield potential as the warm weather has pushed crop forward and dried out previously soggy areas around the country.
Grain market bulls have recently been on the run, hoping to avoid being turned into steers in recent weeks as they have lost a lot of equity.
Most of that was due to the recent USDA acreage report, where it was found that a lot more acreage was switched to corn from the March 1 intentions, due to the high prices. If planting conditions had been good, we could have had another 1-2 million acres of corn, but as it was only 100,000 more acres than the intentions report in March appeared.
Today is the USDA report, long awaited as it contains the projected planted acreage for corn, soybeans, and wheat.
These were much anticipated numbers, with all eyes focused on corn acreage and what happened to it in 2011 with late planting and wet conditions. How did farmers respond to the incentive to plant corn over virtually any other crop?
It's been a long bull market for grains, with prices rising for almost one year straight, on the production problems around the world, and demand.
The high use of grains from the U.S. resulted from the lack of availability of grains from the rest of the world. With high prices this spring (corn running to new all time, all world highs two weeks ago), we also are starting to limit the demand for grains - the job the market must do on a short crop year.