Corn/soy yield potential rises
The soybean and corn yield potential rose again sharply this week, with the bearish news piling up in the market. It looks like it will be record shattering year for yields in the United States, and that is pressuring markets big time.
Crop conditions rose 1% in corn to 76% G/E, and our yield model hiked almost 4 bu/acre to 170 bu/acre! Soybean conditions were steady at 72% G/E, but our yield model rose 0.3 bu/acre to 45.6 bu/acre so this is very bearish. Already the corn yield is at 170 bu/acre, and it is rising fast! Overall, the other crops are also improving in yield potential so this is a very bearish situation.
Corn silking is at 34%, slightly ahead of normal in spite of a relatively late planting period. Soybean bloom is at 41%, slightly ahead of normal 37%. So the crop is also developing slightly ahead of normal as well. This combination of early development and improving conditions is a deadly one for prices. One would expect corn prices to stabilize over the next few weeks as the crop goes into pollinating, but with the nonthreatening weather forecast, the bulls are left with little news to push the market.
Pro Ag can hardly be bearish enough, as prices will have to retreat sharply based on adding 4 bu/acre or 300 MB of production of corn in just one week. That is so bearish it is hard to put it into words, as rarely in 10 years does the yield model jump so much in just one week. Holy cow is all you can say!
We note that USDA’s Friday, July 11 report was bearish, but not as bearish as it could have been as they raised soybean demand 90 MB (40 MB crush, 50 MB exports) to keep carryout at 415 MB. Still, that is a large carryout as USDA recognizes that soybean prices will be lower and will attract demand (average price $10.50). However, with that large a carryout USDA might have to lower that average price as the futures price drifts lower as $10.50 is a high average with that large a carryout. Corn carryout was hiked to 1.8 BB in spite of lower harvested projected acreage. Wheat carryout was hiked to 660 MB as feed use was cut with corn prices drifting so much lower. That was 86 MB larger than the June report, and was probably most surprisingly bearish wheat rather than even corn and soybeans. Seasonally wheat stages a post harvest rally when harvest progress in winter wheat reaches the 30 to 50% level, but with the extremely bearish news in corn and increase in wheat stocks, this seasonally move likelihood is diminishing.
The world number from USDA was just as bearish to the grains as the US numbers. Corn’s world 2013 ending stocks estimate was 3.92 MMT more than expected and 4.35 MMT higher than the June estimate. Corn’s 2014 ending stocks estimate was 3.57 MMT higher than the average trade estimate and 5.45 MMT than June’s estimate. Soybeans world numbers were a little closer to estimates but still negative to the market. Soybeans 2013 world stocks estimate was at 67.2 MMT, .30 MMT less than expected but .03 MMT higher than the June estimate. The 2014 world ending stocks estimate for soybeans was estimated at 85.3 MMT, .51 MMT higher than expected and a staggering 2.42 MMT higher than June’s estimate. The world wheat numbers were mixed as 2013 estimates were friendly wheat (184.3 MMT, 1.44 MMT less than expected and 1.75 MMT less than June). Wheat’s 2014 ending stocks estimate was negative wheat at 189.5 MMT, 1.13 MMT more than expected and .89 MMT higher than June. In all it is going to be hard for the grains to rally when stocks are increasing.
As we’ve said before, Pro Ag remains bearish as the crop (corn and soybeans) is improving steadily in yield potential each week, reflecting the adage that ‘rain makes grain’. Pro Ag remains bearish grains, especially corn and soybeans, as we go through the critical reproductive stage for crop development with no threat to crop yield potential.