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Yield models rise, prices crumble
The 2013 crop continues to improve in yield potential, with the corn and soybean crops now suggesting their highest yield rating of the year this week, and in an ominous sign for prices, are still rising to their highest levels of the year. This is almost the opposite of the disastrous 2012 crop, with 2013 looking like a bumper crop year. It's likely that with a late frost we will have a record large yielding crop in 2013, and that means the price potential is being lowered day by day.
Crop conditions released yesterday afternoon showed the corn and soybean crops both improved 1% to 64% G/E corn and soybeans, well ahead of last year's numbers and indicating an above-average crop is on the way. Pro Ag yield models jumped to 164 bu/acre corn (tying our all-time high yield of 2009), up 1.3 bu/acre from last week. The trend on corn yields is now moving up again, with the highest yield estimate of the year. This is now well above USDA's 156.5 in July, and also above INforma's estimate of 158.6 bu/acre released yesterday. (This number is too low in Pro Ag's opinion.) It's likely given a benign weather forecast for the next two weeks (cool with seasonable rainfall) that this number will go up further in August.
The soybean yield model also went up 0.18 bu/acre to 44.6 bu/acre, now above USDA's July 44.5 bu/acre and trend of 43.6 bu/acre. This is also well above INforma's estimate of 42.7 bu/acre, a number that Pro Ag believes is well below the actual number. (We expect USDA to leave their estimate at 44.5 bu/acre.) Overall, the yield models are rising, not declining, as we go through the critical month of August. Basically, cool weather and intermittent rain showers across the Midwest are producing what is likely to be a record large (in the case of a late frost year) to a normal or slightly above-normal crop (with a normal or early frost date).
Crop development is behind normal, with corn only 18% dough vs. 31% normally, and 86% silking vs. 89% normally. Soybeans are 79% blooming vs. 85% normally, with 39% setting pods vs. 51% normally at this time. So we have a crop about five days behind normal in development right now, which means we need a late frost to produce our bumper crop.
Other crops are also developing well, with sorghum rated 47% G/E, same as last week but well above last year's 25% rating. Winter wheat is 87% harvested, 1% ahead of the normal pace. Spring wheat conditions are rated 66% G/E, down from 68% last week and 63% last year. Overall, the HRS wheat crop looks as good as last year's good crop. Oat harvest is 38% done vs. 52% normally, with conditions down 1% from last week's 56% mark. Barley is 4% harvested vs. 11% normally, with ratings down 3% to 65% G/E, still 4% higher than last year. Pasture and range conditions are 45% G/E, well ahead of last year's 16%. Cotton is 45% G/E, same as last week and well above last year's 41%. Overall, we have an above-normal crop in 2013, and it continues to improve.
As we stated last week, Pro Ag remains bearish, as the crop continues to develop in good weather. Pro Ag anticipates a bounce after the recent washout to near $12.30 Nov. soybeans and $4.90 Dec. corn, at which time we would once again recommend sales. Downside price targets were $4.50 Dec corn, $9.50 to $10 Nov. soybeans, and $6 CBOT wheat. But as of August 1 we are revising our corn projected low down to $4. (We are likely to drop below $4.50 with ideal pollination and a continued improvement in crop ratings/yield potential.) Essentially, we have the makings of a record large crop, and prices should sag into harvest as the result of this above-average crop year in 2013.
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