USDA Likely to Raise Yields Next Few Months
The Progressive Ag corn and soybean yield models continue to rise each week, and have continued that trend since the end of June for both corn and soybeans. Pro Ag yield estimates as of Sept. 1 were the largest estimates of the year at 172.8 bu/acre corn and 46.50 bu/acre soybeans. This yield for corn would represent a new record large yield, even larger than last year's 171 bu/acre! And the pace that soybean yields are now expanding mean that even USDA's large yield estimate in August at 46.9 bu/acre might in the end be low as we rose to 46.5 bu/acre on Sept. 1.
This coming week on Friday, Sept. 11 we get an updated yield estimate for corn and soybeans in the monthly USDA report that are holding the attention of the trade. The ill-fated Pro Farmer tour is forecasting smaller corn and soybean crops than last month's August estimates, with many in the trade anticipating the same. But the Pro Ag yield models expanded 1.25 bu/acre in soybeans since the end of July, with corn expanding 4 bu/acre since July 27.
Obviously, Pro Ag expects unchanged or higher soybean yield estimates and about 2 bu/acre higher corn estimates. If so, this will be very bearish in the report. By the time this report shows up in media ink, we will know what the report said for sure. But Pro Ag does NOT expect it to be bullish!
Recently, prices have retreated to new lows in soybeans (over 5 year lows, in fact) a few weeks ago, and we are perched right above those lows going into the USDA report this week. We are also at new multi-year lows for wheat as of last Friday, Sept. 4, while corn has fared a bit better in hovering above the summer lows. But that might be temporary indeed, as so far it appears the Midwestern crop is quite good in spite of a few dry spells here and there.
This is typically not a time of year which the markets would rally, though, as harvest of corn and soybeans is just around the corner. Soybean crops are yellowing in many northern locations, meaning they are getting to the crop stage where dry weather can't hurt them much.
Also, the risk of frost damage continues to diminish as the crop matures, so it looks like with no frost forecast in the near term that corn and soybean crops will reach maturity for the most part before the first frost hits. Today's 7 day forecast continues to show above normal temperatures in the forecast (despite forecasts last week saying it would go away). Also, the 8-14 day forecast warmed a bit from the cooler forecast yesterday, taking the risk away of an early frost threat. Also, precipitation amounts are forecast to be seasonable and moderate the next 14 days, keeping yield potential high and leaving soils in good shape for winter wheat planting.
Pro Ag remains bearish from here, expecting us to make new lows (which we have done in wheat and soybeans already) as we get into harvest of the corn and soybean crop. Pro Ag has been an aggressive seller of corn above $4 December corn futures, and soybeans above $9.65 November15 futures (with many of our sales clustered near the summer highs in early July). These may look awfully good by harvest of this year!
We look for lows this fall to be near the $3.20 Dec. corn futures support area, and possibly even the 2008 lows of near $2.90 Dec corn. Lets target $3.20 Dec. corn to start removing corn hedges, along with $8 Nov. soybeans and $4.60 Dec. Chicago wheat. We could have a little ways of downside risk yet in this market, especially if yield potential continues to expand as we enter harvest.
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