June yield loss estimates similar to 2012 drought year, analyst says
The last few weeks have brought an increasing chance that 2020 crops will be adversely affected by drought.
We are in an extremely dry pattern, with almost no rain in the Corn Belt the past week at a time of the year when the highest rainfall amounts typically fall. Farmers are becoming increasingly concerned with drought losses, and already we are seeing crop conditions affected by it in sorghum and corn. Perhaps more concerning is the rapid depletion of what once was plentiful soil moisture levels. The past two weeks’ rapid decline might be the most aggressive loss of soil moisture in decades.
Weather forecasts have gotten less threatening today, with a bit more precip and cooler temps forecast for the next 14 days. However, there is still virtually no rain in the Corn Belt today, and very little forecast the next week. To forecast a return to normal temps and precip in the eight- to 14-day forecast looks like a leap of faith by weather guessers. But they have been right once in a while.
Weekly crop progress is showing a crop increasingly susceptible to significant yield losses from drought in 2020.
The first crop to show that stress has been sorghum, with a huge 7% drop this week in ratings to 48% G/E. Corn also dropped a huge 4% to 71% G/E, which caused the yield model to have its first significant yield loss of 2.17 bu/acre (or about 180 mb). These kind of losses are similar to 2012, with the final yield 25% below trend.
Many are comfortable that corn carryout is 3 billion bu projected, but a 25% yield loss would drop that to -750 mb. So, to say corn prices can’t go up due to high carryout numbers currently projected is very short-sighted. With funds heavily short, if they are forced to cover, the market can move quickly.
Soybean conditions were unchanged at 72% rated G/E, but soybeans are only 2 inches tall in many cases, so it’s hard to hurt a soybean at that period of development. But when they pod, if there isn’t moisture, there isn’t grain, either. More concerning to the Corn Belt is the rapidly depleting soil moisture levels, which showed large declines last week but even larger this week.
Topsoil moisture dropped a nearly unprecedented 9% from adequate/surplus to 69%, while subsoil dropped 6% to 76% adequate/surplus. These huge drops mean the insurance policy against drought of stored soil moisture is quickly depleting. If by July we continue to drop like this, continued drought would devastate corn and soybean yields. Soybean yields could be more affected than corn, but both still have significant moisture needs.
Hot/dry, windy weather is not at all what we want. So, if the current pattern of nearly no rain and hot/windy days continues, we could have a weather market in 2020. Stay tuned, the fun is just beginning!
We note that the media and stock market are reacting to news of increased COVID-19 cases in some areas. Updates by health professionals indicate only 11 counties out of 3,100 counties nationwide are seeing an acceleration of COVID-19 cases.
Ray can be reached at firstname.lastname@example.org.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.
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 this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD
INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Progressive Ag Marketing believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading
advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that advice we give will result in profitable trades.