Crop condition improvement continues
Monday afternoon's Crop Condition report continued to improve for most Corn Belt crops. Corn conditions are improving 1% to 68% G/E, now well above last year and even above average. Pro Ag yield models improved another large 2.6 bu/acre to 160.2 bu/acre, now well above USDA's 156.5 bu/acre and trend. Soybean conditions were unchanged at 67% G/E, but since they typically decline this time of year, the Pro Ag yield model rose a large 0.45 bu/acre to 44.31 bu/acre. The contrast with last year is stark, as last year conditions were rapidly deteriorating, and this year they are constantly improving.
Winter wheat conditions were unchanged at 34% G/E, likely the last week conditions will be released. Our Pro Ag yield model rose a large 0.31 bu/acre to 45.23, but we are quickly losing data and the yield model is becoming more unreliable. Actual yields still seem to be coming in better than expected, and the weather is ideal for harvest (hot and dry). We are now 57% harvested, just 7% behind average. So we are quickly catching up to average pace, meaning double-crop soybeans can be quickly planted on harvested winter wheat acreage.
HRS wheat conditions continue to improve rapidly, up another 4% this week to 72% G/E, well above last year's 66% when we had a record large yield.
Barley conditions declined 2%, though, to 66% G/E but still well above last year's 57%. Pasture conditions declined 2% to 49% G/E, but well above last year's 21% G/E meaning more feed is available to cattle producers (along with large hay yields due to wet conditions). Oat condition remained at 59% G/E, while cotton conditions declined 3% to 44% G/E, and sorghum conditions were down 5% to 44% G/E due to heat in the HRW wheat country. But rice condition improved 3% to 69% G/E as the Delta continues to improve as it dries out somewhat.
Weather remains favorable for most of the Midwest, with cool temps and moderate rainfall in the eastern Corn Belt and continued forecasts of cool and wet conditions across the entire Corn Belt the next two weeks.
These are favorable forecasts (although it remains hot in the HRW wheat belt, which hurts late-season crops but advances the wheat harvest). The next five days will include normal rainfall (.5 to 1.5") in the central and eastern Corn Belt as well as the Northern Plains. However, it will be relatively dry in the western Corn Belt, although the heat will be limited to the far western Corn Belt and northern Plains (where heat might help to accelerate late-crop development - a bearish development).
Planting of crops in the northern U..S and central Corn Belt has likely ended (with North Dakota only getting 90% of sunflowers planted by July 7), while double-crop soybeans might still be planted in central and southern Corn Belt locations. Actually, a great deal of acreage was planted from June 10-July 1, with many producers planting well beyond the final crop insurance planting date, accepting 1% lower coverage per day planted late.
With the recent rally, it's time to more aggressively sell corn, wheat, and soybeans. We would recommend catch-up sales of 2013 crops, and also making catch-up sales of 2014, 2015, and selling some of the 2016 crops (you can advance these sales). In corn, Dec14 corn is much higher than other corn contracts, so perhaps selling Dec14 corn against 2013, 2014, 2015, and 2016 corn expected production is still a viable sale option?
While the market has bounced the past two days with nice upside reversals Monday, with good follow-through Tuesday, there is little fundamental basis for the bounce in grain prices. Instead, this is likely a move higher in corrective mode from the recent washout in grains to new lows. That means it's likely the downtrend will continue, with a move to new lows likely in the near-term as crops continue to improve in the field. It's likely USDA will also issue a negative report Thursday, and it may not be in the best interest of traders to ignore that negative report. Pro Ag remains bearish as crop growing conditions continue to improve, meaning a bumper crop is not just possible, but becoming likely in 2013. Downside price targets remain $4.50 Dec corn, $9-$9.50 November soybeans, and $6 Chicago July wheat.
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