The top is off the yield, but by how much, analyst asks

The green soybeans will get hurt the worst.

The U.S. crop ratings continue to decline in the U.S., helping the market understand that the 2020 crop is no bumper crop like USDA insinuated in its August report.  

Instead, we probably have a more ‘normal’ crop, with problems with drought in Iowa and points eastward, due to a dry July and August.  Also, some areas like North Dakota and northern Minnesota had too much rain at critical times – drowning crops in soggy soil for much of the summer. Of course, there are good areas, too, that are in between Iowa and the soggy north – where crops will be quite good. And let’s not forget the Iowa storm that leveled a lot of corn, causing significant yield losses in these 100-plus-mph winds.  

Currently, weather forecasts call for rain in Texas, Oklahoma, Kansas, Iowa, Wisconsin, and parts of Nebraska and Colorado the next few days – probably the best rains in weeks in this area (especially Iowa). After that, the forecast turns much drier for all of the Corn Belt, with below-normal precip in the eastern Corn Belt the entire 14-day period, and below normal in the four- to 14-day period for virtually all the western Corn Belt as well.  

Temps will cool to below normal in all of the U.S. Corn Belt as well, so fall is starting early.  

Frost hit parts of North Dakota, Minnesota, and Canada starting yesterday (about one to two weeks early) and will likely continue to plague some areas during this cold period in September. Almost all-late season crops are still immature, with only 20% of soybeans dropping leaves on September 6 (4% ahead of normal), and 25% of corn mature (vs. 19% normally).  

It’s likely that some yield loss will occur (especially for the very green soybeans), but because the crop was about three to five days ahead of normal progress, the damage will be less than normal on today’s frost date.    

Crop progress, out yesterday, continues to show a decrease in corn/soybeans rated G/E, with another 1% drop in both crops. Corn is now rated 61% G/E, down 1% from last week.  But the corn yield model rose fractionally to 177.4 bu/acre vs. USDA’s August guess of 181.8 bu, and trend of 175.4 bu. Soybean conditions dropped 1% as well to 65% rated G/E, and the yield model dropped 0.10 bu/acre to 50.01 bu (vs. USDA at 53.3 bu) and trend of 49.19 bu. We still have a slightly above-trend yield in the field, but it is also still declining.  

HRS wheat is 82% harvested, about 5% behind normal but this is quite good considering the late start to planting this spring. Barley is 85% harvested, also only 5% behind normal.  Winter wheat is 5% planted, about 2% ahead of normal. Soil moisture levels are still declining, with topsoil down 1% to 49% rated adequate/surplus now vs. 67% last year. We may have to worry about a more significant drought hitting us next year if we don’t have a replenished soil profile by next spring. (Soil moisture is the cushion, or insurance policy for bouts of summer drought.)  

Grains seem to have hit a resistance point recently, and are struggling to sustain the bull market ahead of harvest without additional bullish news to push it higher. However, once harvest is over, there are some powerful indicators that prices will resume the uptrend, including a devalued dollar, massive stimulus that is inflationary, and already rising stocks and commodity prices. The U.S. is pursuing a policy that will cause inflation and a weaker dollar – massive stimulus from both the FED and elected officials.  

It’s possible that in seven years, everything will cost two times as much, due to inflation.  That means $5 wheat becomes $10 wheat; $30,000 cars are $60,000; $300,000 houses are $600,000; and $500,000 land is $1M. You don’t gain purchasing power by owning it, but think about being short stocks or commodities during that period. The next five years might be one of the best times in history to own stocks, commodities, and real estate.  
Ironically, borrowing money to do it at 3% interest might be the most profitable investment for the next five years. Right now the FED doesn’t seem to care about inflation – it’s another depression from the pandemic they are worried about. Inflation is their least concern, and perhaps even desired result to get people to spend money after the shutdown.

Ray can be reached at raygrabanski@progressiveag.com.  
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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.  See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com. 

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 
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