Market analyst: Crops continue to improve

07/09/19 — For the second week in a row, the yield potential of corn and soybeans improved from the previous week as corn ratings improved 1% to 57% rated G/E, and soybeans were down 1% to 53% G/E. Corn went up 1.7 bu/acre on yesterday’s 1% improvement in G/E ratings, with yields now at 167.8 bu/acre, above USDA’s current June estimate of 166 bu/acre. That’s up from 163.8 just two weeks ago for a rise of 4 bu/acre in just 2 weeks. That’s quite an improvement from the disastrous start this crop had.

Soybean yield potential has also increased, this week up 0.11 bu/acre to 47.2 bu. That’s up from the June 24 low yield estimate of 46.7 bu/acre for a gain of 0.5 bu/acre in just 2 weeks! However, it’s still well below USDA’s ‘trend’ yield of 49.5 bu/acre that they stuck with in June. So they’re still at least 2 bu/acre too high, which would be about 160 mb more lost production from the current estimates. We also likely lost a great deal of acreage from the current June 1 estimate as June was anything but a good planting month in much of the Corn Belt.

To compare crop conditions the past 33 years, we have only 4 other years where soybean conditions were this bad. 1988 and 2012 were both well below current corn/bean ratings, and these ended up to be devastating droughts. 1993 was a flood year, with poor yields the result as well. 2005 was the last year, with conditions very similar to current numbers and it turned out to be nearly a normal yield. So the crop can improve with the right weather.

Corn has 5 years in the past 33 rated this bad, with 1988 and 2012 the two major drought years that resulted in disastrous yields and extremely high prices to ration demand. 1993 was the flood year, with disappointing yields as well. The two other years were 2002 and 2005, both relatively poor yield years but not disasters like 1988/2012. So there is still a lot of time left for this crop to either improve or go backwards.

Rain is falling today from Kansas north to the Canadian border. Weather is continually threatening to turn much drier, but once again today rain comes back into the 8-14 day forecast in the central and eastern Corn Belt. With soil moisture still high from the wet spring, a little dry weather would actually help the crops initially. The crops are late, though, with USDA reporting that there is still 4% of the soybeans to be planted (really), and 10% yet to emerge on July 7. Corn is only 98% emerged (2% not up by July 7), and 8% silking vs. 22% normally (14% behind). So if you don’t look at the calendar, things are coming along just fine.

Winter wheat is 47% harvested vs. 61% normally, so 14% behind average. Conditions actually improved 1% to 64% rated G/E, well above last year’s 37%. So the crop should be good — if they can get it all harvested. HRS wheat is 56% headed vs. 73% average (17% behind), with condition up 3% this week to 78% rated G/E (vs. 80% last year). So the spring wheat, though very late, is so far doing well with mostly cool temperatures so far. Can we avoid extreme heat in the next 4-6 weeks of filling heads/kernels? If so, we might be allowed to keep this relatively decent crop. Barley is also behind average development, with only 55% headed vs. 75% normal (20% behind). Crop conditions also improved 1% to 73% G/E, reflecting the drier and warmer weather.

For now, drier and warmer weather is good coming off a 2-3 month stretch of cold and wet weather. But too warm and too dry eventually can become a problem. Soil moisture levels are finally starting to dry out, with topsoil moisture levels down 3% in adequate/surplus to 85%, and subsoil down 2% to 87% adequate/surplus. So we finally are starting to dry out, and it shows in the improvement in most crops.

Dryness could hurt the sandier soils that look the best right now, but we’ll need some extended dryness to dry soils enough to make a big difference. Many are worried about the shallow roots of this crop as it got started in soggy soils. If it gets dry quickly, we could see a disaster develop. But by far the biggest threat left to the 2019 corn and soybean crop is an early frost. If it’s early, we’ll lose a lot of crop. We’ll need 2 weeks extra to help most crop, and a month or more for others (which is unlikely). So the question is not whether or not frost will damage the crop, but how much will it damage the crop?

With another improvement in crop yield potential, the summer is helping to shape up the crop and grow out of its wet funk. So prices are sagging. Corn is at risk of a head and shoulders top, and we are now on the right shoulder. It could become a sell on technical charts quite quickly unless some supportive news can come along quickly.