Yield Models Show Yield Drops Already
The drought that started in the northwest Corn Belt and HRS wheat country expanded last week, and the dry and warm conditions in the Corn Belt rapidly depleted soil moisture levels and started to hurt crop condition ratings, too. These are some very bullish signs because IF the weather pattern were to continue just a few more weeks, we would have a full-fledged bull market in place. For now, though, the forecast is to return to more normal weather over the next 14 days, starting with a relatively wet seven-day forecast.
Rain today is falling in North Dakota and spreading into South Dakota and Minnesota, with much-needed rainfall in HRS wheat country, where crop conditions declined a huge 10% in the G/E category in the Crop Progress/condition report yesterday. The rest of the country, however, is mostly dry today. The seven-day forecast remains above-normal precipitation in the northern Plains and eastern Corn Belt and the southeast, but mostly dry in the western Corn Belt and western U.S. Temperatures will be above normal in most all of the country.
The eight- to 14-day forecast today (6/13) has moved some rainfall out of the central and southern Midwest in this morning’s weather forecast (it seems to shift a bit back and forth every day), with the western Corn Belt forecast to remain relatively dry as well. But the northern Plains and eastern Corn Belt are now forecast to see normal to above-normal precipitation, with temperatures forecast to cool down to normal to below normal for much of the Corn Belt. This doesn’t seem like that threatening of a forecast today. But we all know that these weather forecast runs are conducted twice a day, so they are subject to change.
Crop conditions yesterday paint a different picture than the current forecast, as the crop is losing yield potential in most crops, mostly especially in HRS wheat, which we already mentioned declined a huge 10% in G/E ratings. It’s now down to only 45% G/E vs. 79% last year at this time. The drought has affected HRS wheat immensely in the past week (although rain will be beneficial where it falls today and this week). Corn conditions also declined 1% to 67% G/E, vs. 75% last year. The Pro Ag corn yield model dropped a large 2.27 bushels per acre to 164.6, about 6 bushels per acre below USDA’s 170.7 estimate or about 500 mb! That is significant in that, combined with a 2-million-acre decline in planted acreage, it would drop carryout about 800 mb from current projections. All of a sudden, we would have a relatively tight carryout, and crop conditions are still on the decline – and it’s only June! This is a very bullish development, indeed, as for the past year no one could foresee the ending stocks dropping to tight levels. It’s only June, and already we can now see it’s possible to cut them significantly from last year (possibly even in half)!
Soybeans are 92% planted, 5% ahead of the five-year average of 87% planted, with 77% emerged, 4% ahead of the five-year average of 73% emerged. But the crop conditions are only 66% rated G/E, down from 74% last year. The Pro Ag yield model is only 46.4 bushels per acre vs. USDA at 48 bushels, so we are about 135 mb smaller projected yield than USDA. This is friendly soybeans as the crop is below average, and if dry conditions prevail for a few weeks, the yield potential could decline significantly into the heart of the growing season. To go from 495 mb carryout to 360 is already a cut of a third in ending stocks, so if yield goes backwards for three to six weeks during the growing season, things could get interesting even for soybeans on the price side.
Winter wheat is 50% rated G/E, up 1% from last week but still well below last year’s 61% rating. The Pro Ag yield model declined slightly to 50 bushels per acre, down 0.07 bushels per acre. Harvest is 17% complete, 2% ahead of the average pace and up 7% from last week.
In other crops, cotton is 92% planted, 2% ahead of average while crop ratings rose 5% to 66% G/E, well ahead of last year’s 53% ratings. Sunflowers are 80% planted, 17% ahead of the average pace of 63% planted. Sorghum is 71% planted, 2% behind the average pace of 73%. Sorghum is rated 67% G/E, down from last year's 71% rating. 16% is headed vs. 13% normally so we are 3% ahead of the average pace. Barley conditions actually rose 3% to 72% rated G/E, down from 78% last year, but this seems at odds with the 10% decline in HRS wheat ratings. Both crops basically grow side by side, so something seems amiss in the barley ratings. Oat conditions also declined a huge 5% to 57% rated G/E, down from 70% last year at this time.
Probably one of the most bullish signs for this summer is the fact that a rapid decline in soil moisture conditions occurred nationally last week, with topsoil moisture rated adequate/surplus down a huge 11% from last week to only 69% rated adequate/surplus, well below 78% a year ago. Subsoil also declined significantly, down 7% to 78% rated adequate/surplus, now below last year’s 82% ratings. It must have been quite dry to move subsoil moisture levels that much! If we have many more warm, dry weeks like last week, soil moisture will decline very quickly and we will have no reserve for the critical reproductive stage of development later this summer, when crop water demands are high and rainfall typically cannot provide all that is needed for optimal crop development.
Will the weather turn from the current warm/dry pattern to one with more normal precipitation and temperatures as forecast today? Or will the current pattern that is depleting soil moisture and rapidly declining some crop ratings continue? This is a key question for the market to answer in the next few weeks. Clearly, last week’s weather was bullish, and may be able to feed this bull market for now (at least until proven otherwise).
Ray Grabanski is President of Progressive Ag Marketing, Inc., the top-ranked marketing firm in the country the past eight years. See progressiveag.com for rankings.
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