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Weather, weather, and weather drive July markets, analyst says

Even stronger exports can’t compare to the importance of crop-weather.

It’s that time of year again – the time when there are three important market factors for grains: weather, weather, and weather.  

We could sell 50% more exports per week in the summer, and the impact of that pales in comparison with the effect on supply and demand with weather.  

For example, in 2012 we lost about 2 to 3 bushels per acre per week of potential corn yield during that 10-week drought. Therefore, every week we lost 180 to 270 million bushels (mb) of corn production. There is no other fundamental change in such a short time that can occur compared with the impact of weather on potential corn yields in July.  

In comparison, we export on average 18 mb of wheat per week, 41 mb of corn, and 39.5 mb soybeans. A 10% increase in corn/soybean exports is only 4 mb (2 mb wheat), and +20% is only 8 mb corn/soy exports (4 mb wheat). So, while the biggest demand impacts can be increased exports, they pale in comparison with weather in July and August.  

There is only very scattered rain in the U.S. today, with rain moving through South Dakota and into Iowa, as we start the day (but almost nowhere else in the Corn Belt). Another small dot has rain falling in parts of Louisiana. The next seven days will be mostly dry, with the center of dryness in Illinois and Indiana. However, one forecast today is bringing more rain into the eastern Corn Belt in the eight- to 14-day forecast as well as the next seven days.  

However, this happens frequently in droughts as the tendency of forecasters is to move back toward ‘average.’ However, the NWS six- to 10-day and eight- to 14-day forecasts were still warm and dry last night.  

Crop progress reports showed corn conditions down 2% to 71% G/E and unchanged soybeans at 71% G/E.  

However, the Pro Ag yield model rose 0.7 bu/acre in corn to 178 bu/acre, and up 0.4 bu/acre soybeans to 50.2 bu/acre. Both are the highest yield estimates of the year as the crop continues to thrive on the soil moisture levels, which were high to start the season.  

We used up another 2% of the topsoil levels and 4% of the subsoil, dropping to 64% adequate/surplus topsoil and 68% subsoil. At some point, we will run out of soil moisture to borrow to make up for rainfall shortages, but for now things are still OK.  

It’s July, so there is a limited amount of time that corn can get hurt. But soybeans could have a bigger problem if rainfall doesn’t soon increase. 

Ironically, after early corn planting we still have silking behind normal at 10% vs. 16% normally. Soybeans are ahead at 31% blooming vs. 24% normally, but only 2% podding vs. 4% normally.  

Sorghum conditions also improved 3% to 48% G/E, still well below last year.  

Winter wheat is 56% harvested, 1% ahead of normal as that harvest is going well amidst hot/dry conditions (perfect for harvest). However, winter wheat conditions dropped 2% to 51% G/E. HRS wheat conditions improved 1% to 70% G/E, as some rains fell in the region (some very heavy).  

Barley conditions dropped 2%, however, to 73% rated G/E.  

Overall, the crop is developing OK, despite hot/dry conditions depleting soil moisture. So far, we had enough stored soil moisture and scattered rainfall to prevent rapid declines, but eventually we need more rain to prevent further declines in both soil moisture and conditions.

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 progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com. 

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