Rehedging With a 'Mammoth' Crop in the Field

Pro Ag yield estimates keep rising. Our corn yield is now nearing 174 bushels per acre and soybeans 47 bushels an acre – massive crops. It may be decades before we shatter previous yield records by such a massive amount! The 2014 crop will go down as a massive crop of corn and soybeans, with ideal weather all year, and especially ideal as we finish out August and move into September with warm and wet weather, which is allowing crops to fill in unprecedented good weather.  

Weather has been nearly ideal, and it's propelling this crop to higher and higher yield estimates by Pro Ag's yield models for corn and soybeans as it remains warmer than normal across the Corn Belt for the next seven days, and intermittent rain showers continue to bless grain growers. The next seven days will bring .5 to 2 inches, locally 3- to 4-inch rains across 85% of the Corn Belt, including the HRW wheat area and most of the Delta that will finish this crop with ample moisture nearly everywhere. It will also remain warm and wet for the 8- to 14-day forecast as well, also perfect weather to finish off this mammoth crop with ideal conditions.           

Already, the Pro Farmer tour is outdated as the crop is improving rapidly now to finish off the season. The crop conditions improved 1% in corn to 73% G/E yesterday and declined 1% in soybeans to 70% G/E, but the yield models in both crops continued to rise rapidly. Corn is now the highest rated it has been since the massive crop of 1994, with soybeans the highest rated crop ever in 29 years. This is truly a mammoth crop! The Pro Ag corn yield model rose 2.3 bushels per acre to 173.8 bushels an acre, with the soybean yield model rising 0.41 bushels per acre to 47 bushels per acre. It's likely that this crop will not only shatter yield records, but will shatter them with a once-in-decades record!

The crop is also developing nicely, with corn now at 83% dough stage vs. 78% normally, and 35% dented vs. 43% normally. Soybeans are slightly ahead of normal pace with 90% setting pods vs. 89% normally. Cotton conditions rose 1% yesterday to 51% G/E, with development at normal levels at 19% bolls opening vs. 18% normally. Sorghum conditions declined 1% to 58% G/E, with 86% headed (vs. 85% normally), 52% coloring (vs. 44% normally), and 34% mature (vs. 27% normally). Rice conditions were steady at 74% G/E, with 11% harvested vs. 17% normally.  

HRS wheat is only 27% harvested vs. 49% normally, with only 10% harvested last week during what was a wet week in HRS wheat country. However, weather will be clearing most of this week, and it's expected that harvest will be rapid. HRS wheat conditions declined 2% to 66% G/E due to the rain delays in harvest this week. Oats are 74% harvested vs. 86% normally. Barley is 43% harvested vs. 50% normally, with the rating dropping a large 6% to 56% G/E due to the rain delays and the quality damage that it can produce in barley.  

Overall, we have a mammoth corn and soybean crop on the way, with corn approaching 174 bushels per acre and soybeans at 47 bushels per acre and rising. HRS wheat and barley are declining in condition due to quality concerns, but the crop is also a good one if we can just get it harvested.   

We have rehedged all grains recently, remaining 100% hedged for multiple years as the trend is down and we are going to have record-shattering, mammoth large yields of grains in 2014. We may have to revise lower our objectives of expected lows under $9 soybeans and $3.30 corn during harvest. In fact, the next targets are about $9.40 lows soybeans and $3.30 corn, but the targets becoming more likely to be hit are $8.40 soybeans and $3.05 corn for lows if we keep adding bushels to this year's crop, and frost stays away this fall until crop maturity.

They are surprisingly low prices we are forecasting at $8.40 Nov. soybeans and $3.05 Dec corn for the lows (likely around the January final crop report), but we need to take prices low enough to attract demand to get rid of this mammoth crop, and limit supply increases in 2015 with very low prices until spring planting is completed. It's likely we will make multiple year lows (like for the next three years) this winter and into spring.  

It should be a long, slow low formed after this massive crop, with corn and soybean prices likely to form a bowl bottom on the three-year lows made this late fall/winter. There will be plenty of time to buy it at or near the lows, as it could take three months or more to form the bottom. There will be a lot of lamenting about how low prices will get this coming year, especially among those who did not hedge heavily. This will be a great time for buyers of grains to buy up multiple years of grain sometime from January to April 2015.  

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