Crop Condition Ratings Take Center Stage
While crop yield potential hasn't changed much in 2017 for corn and soybeans from spring planting to now, prices have fluctuated a great deal. From late June to early July (in 11 trading days), we went from the year’s lows to the year’s highs in new-crop corn and soybean prices. However, from mid-July until late July, we had a significant change in the extended 14-day weather forecast, going from warm/dry in the Corn Belt to cool/wet. That is the forecast as we start August, with most of the Corn Belt forecast to have cooler-than-normal weather, and also above-normal precipitation. The only exception happens to be North Dakota, South Dakota, and Minnesota – this region is forecast to have cool weather, but less-than-normal precipitation (which is different than most of the rest of the Corn Belt). That could be a critical difference, as these three states might continue to see crop deterioration in August.
Soybeans are leading the grains lower this morning (August 1) after a surprising 2% improvement in the G/E rating of soybeans last week. That was in spite of a relatively dry week in the western Corn Belt, but there were improvements in key eastern Corn Belt states that had been too wet up to this point (a 7% improvement in Illinois, 4% Indiana, 7% Michigan, 3% Kentucky, and 3% South Dakota). States with significant declines included Kansas (-4%), North Carolina (-7%), North Dakota (-7%), and Tennessee (-7%). The Pro Ag yield model rose for soybeans 0.25 bu/acre to 46.48 bu/acre (reversing about half of last week’s decline), a negative development indeed on a week when conditions were expected to decline. With cool and somewhat wet conditions forecast the next two weeks, the market is taking a decidedly bearish look at recent developments. Soybeans are 82% blooming, ahead of the normal pace by 2% while 48% are setting pods, 3% ahead of the average pace.
Corn conditions declined 1% to 61% rated G/E, with the Pro Ag yield model staying relatively stable with just a 0.07 bu/acre improvement in yield potential to 167.7 bu/acre. That is still below the USDA projection of 170.7 bu/acre, but the cool and relatively wet conditions forecast the next two weeks could help the corn crop as well. So the crop condition ratings are putting some pressure on grain prices along with an improving weather forecast. Corn states with significant improvements in the G/E ratings were Colorado (+9%), Indiana (+2%), Iowa (+3%), and Pennsylvania (+14%). States with significant declines included Kansas (-4%), North Dakota (-5%), Tennessee (-4%), and Texas (-5%). Corn silking is at 85%, equal to the five-year average while 23% is in the dough stage, 2% behind average.
HRS wheat conditions declined another 2% to be only 31% rated G/E, with the most significant declines in Idaho (-10%), Montana (-4%), and North Dakota (-3%). That is compared with a 68% rating a year ago, but the drought in HRS wheat country is well documented now. HRS wheat is 9% harvested, equal to the average pace while winter wheat is 88% harvested, 2% ahead of the normal pace.
Surprisingly, sorghum ratings improved 2% to 61% rated G/E. The cooler temperatures along with scattered rain led to the improvement. Sorghum is 5% behind the normal pace of coloring at 23%. Oat conditions were unchanged at 51% rated G/E, with 35% harvested (10% behind the normal pace). Barley is 6% harvested, 3% behind the normal amount while conditions dropped an additional 2% to 49% rated G/E, well below last year’s 72% level.
Soil moisture ratings dropped 1% to 53% rated adequate/surplus topsoil, and 1% to 57% rated adequate/surplus subsoil last week, so we still are depleting soil moisture levels across the U.S. But the market is not very concerned with this development now that the weather forecast has turned to much cooler and wetter.
The next seven days continue to forecast below-normal temperatures for all of the Corn Belt, with mostly above-normal precipitation for the southern half of the Corn Belt. The northern half had a normal precipitation forecast yesterday afternoon, but some of that rain was taken out of the forecast in this morning’s weather runs so that some parts of some northern Corn Belt states will see below-normal precipitation. Overall, this is a huge improvement from the warm/dry forecast pattern of just a few weeks ago.
The eight- to 14-day forecast also calls for below-normal temps in all of the Corn Belt, with above-normal precipitation in the southern half of the Corn Belt and mostly normal/below normal precipitation in the northern half. The states that seem to consistently have the driest forecast are unfortunately North Dakota, South Dakota, and Minnesota. These areas seem to be in a droughty pattern, and just don’t seem to be able to get out of it. Perhaps the cooler weather forecast will also bring some much needed rain?
We recommended catch-up sales Friday at $10.05 November soybeans or better, $7.46 September Minneapolis wheat, and $3.95 December corn. Soybeans and HRS wheat hit those targets, but corn did not. Unfortunately, our marketing opportunities for 2017 appear to be closing with the much lower corn and soybean markets. Even HRS wheat has declined $1.25 from its highs in July although the crop has probably continued to decline under droughty conditions. However, it’s harvest now for HRS wheat, so it may be difficult to continue to rally the market while farmers are bringing the crop in.
It will be interesting to see if the forecasts for cooler and wetter conditions are realized in August. If so, we could have a much better soybean crop than many expected earlier this year. But if not, we still could have some excitement in grains before the summer is over.
Ray Grabanski is the president of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings.
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