Content ID

145210

Record-Large Crop Estimates Seem Convincing, Analyst Says

The USDA may be right.

Yield models for corn and soybeans continue to expand, highlighting the excellent weather we have had to end the season and start the harvest for these crops.  

Weather in August and September, thus far, has been quite good. And there is still no sign of widespread frost that will prematurely end the growing season in 2016. Instead, relatively warm temperatures are forecast that will allow crops to mature naturally, and typically that means higher yields.

Weather forecasts today continue the warm pattern into late September, with a band of showers the next seven days across the western Corn Belt and HRW wheat belt.  

The eastern Corn Belt will be mostly dry, which will allow harvest to expand rapidly the next week. The eight- to 14-day forecast looks to also be warm and, along with scattered showers, that will also be good harvest weather. This should allow harvest of corn and soybeans to progress as the crops are allowed to dry down for combines to roll.  

Crop progress reports came out yesterday, September 19, with the corn conditions unchanged at 74% rated G/E, well above last year’s rating of 68% G/E. The Pro Ag yield model lost one data year in 1988, but the model went up 1 bushel per acre to 178.4 bushels per acre, now well above USDA’s 174.4 estimate in September. 

Soybean conditions improved 1% from the good to excellent category, still rated 73% G/E vs. last year’s rating of only 63% rated G/E. The yield model continued to rise, though, another 0.3 bushel per acre to 49.12 bushels per acre (vs. USDA’s September estimate of 50.6 bushels per acre). So the yield models of both crops continue to rise.

Corn is now 93% dented vs. 91% normally, with 53% mature vs. 48% normally, and 9% harvested vs. 12% normally. Soybeans are 46% dropping leaves vs. 43% normally, and 4% harvested vs. 5% normally. Crop development is about perfect, and so far there have been only light frosts in far northern areas with still no sign of a killing frost in the forecast. It looks like crops will be allowed to mature naturally, and that means it might be even better yields in northern areas than normal.  

Other crops show sugar beets at 11% harvested vs. 8% normally, HRS wheat at 98% harvested vs. 93% normally, and winter wheat 17% planted vs. 16% normally.

Sorghum is 88% coloring vs. 81% normally, with 51% mature vs. 44% normally, and 29% harvested (equal to normal). Sorghum ratings went up 1% to 66% G/E, the same as last year’s strong rating.  

We continue to target the $9 November soybeans area on the low side of prices, at which Pro Ag would target removing some hedges. With corn, we removed 25% of our hedges at $3.20; but put them back on at $3.40 December futures or better Monday, September 12, before the report, and target removing the rest at $2.90 December futures. Markets seem firm right now, and do not show any signs of more weakness recently as people question the large yield estimates in September by USDA. But with yield models continuing to expand, it’s possible USDA might be right about record-large yields of both corn and soybeans.  

As we stated last week, it looks like we are going to get a record-large wheat, corn, and soybean crop in 2016. And prices pretty much reflect that reality already, as we are at or near some multiyear lows for corn and wheat, and seemingly on our way there for soybeans, too. 

How long we’ll stay down here at low price levels might be the next question of the day in the marketplace. Usually, bottoms last months while tops last minutes, so it might be a while before prices start to move higher.  

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on thiscommunication in making trading decisions.

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