10/07/14 — Weather is bringing rain to the states of Ky. and Tenn. as well as surrounding states over the next 7 days that will delay harvest there. However, the rest of the Corn Belt will enjoy an extended period of dry weather over the next 2 weeks, with mostly normal to above normal temps as well that will accelerate harvest (especially in the western Corn Belt). So far yields have been exceptional, especially in the south as they had nearly perfect weather all year long (especially during the pollination period in July and bloom of soybeans in August).
Weekly crop conditions continue to suggest that yields are better than expected as they continue to improve during harvest. Corn conditions moved 1% from good to excellent, remaining at 74% G/E rating this week – the highest since the record shattering crop of 1994. Soybean conditions also improved 1% this week to 73% G/E, now also the highest rated crop since the record shattering year of 1994. Private estimates now have enough harvest results to be honing in on the final yield, and most private estimates are now above our yield model of 47.7 bu/acre soybeans and near them at 177.5 bu/acre corn. We are starting to run out of data for years in yield models so they are becoming less reliable now, leaving the final yield models at the above numbers. But now, what’s important is what is in the combine, not on any papers.
Harvest is advancing with corn at 17% harvested (vs. 32% normally) and soybeans at 20% harvested (vs. 35% normally). Maturity is advancing so that it is becoming little concern now, with corn at 77% mature vs. 81% normally, and soybeans 83% dropping leaves vs. 84% normally. We have been saying since harvest yields started arriving that Pro Ag yield models of 177.5 bu/acre corn and 47.7 bu/acre soybeans may be low if anything (USDA is at 171.7 bu/acre corn and 46.6 bu/acre soybeans). Note that Informa reduced harvested acreage by 2.3 million acres corn and 1.2 million acres soybeans, which offsets some of the bearish news on yields.
Other crops are developing well, with cotton bolls 73% opening vs. 79% normally, and 15% harvested vs. 18% normally. Cotton conditions dropped 2% to 47% G/E. Sorghum is 95% coloring vs. 93% normally, with 67% mature vs. 64% normally, and 37% harvested vs. 38% normally. Sorghum conditions were steady at 57% G/E. Surgarbeets advanced 28% in harvested to 41% complete vs. 26% normally, with an excellent dry week allowing diggers to move last week. Sunflowers aare 1% harvested vs. 9% normally, with rice 70% harvested vs. 71% normally. HRS wheat harvest is finally wrapping up with 96% harvested vs. 98% normally, while winter wheat planting is going great with 56% planted vs. 53% normally, with 28% emerged vs. 24% normally. Overall, we have an excellent crop in 2014, just a little later than normal in development and harvest. With a good weather forecast the next 2 weeks, that could get closer to normal (especially in soybeans). Pasture/rangeland conditions improved 1% to 50% rated G/E, up considerably from normal so cattle will be on pasture longer this fall.
As we said before, USDA’s updated stocks report will help the soybeans S/D statement in October as beginning stocks will be reduced to 92 mb (48 mb smaller stocks) and the rest of the demand picture should improve with more production (and last year’s demand higher with the revised larger production number and demand numbers). But that hardly justifies yesterday’s 30c rise in soybeans while yields are so impressive.
We expect the Oct., Nov., and final Jan. report to show hikes in corn and soybean yields as “large crops get bigger” as our Pro Ag yield models and harvest yields suggest they will. As long as crop sizes continue to go higher, prices will need to go lower to stimulate demand. We remain 100% hedged for multiple years as the trend is down and we are going to have record shattering, mammoth large yields of grains in 2014. Our targets for removing hedges remains $8.40 soybeans and $3.05 corn. Wheat will likely not bottom until the corn finally gets to its eventual low as well, at which time the wheat market might finally hit a bottom as well.