Crop yields start to rise
07/06/15 — We’ve had a nice bullish run in the markets the last few weeks, with corn up about 75c, soybeans up $1.30 and wheat up $1 or so. But all good things must come to an end, and this rally might be standing on thin ice. Much ado has been made about all the crop problems in the U.S. due to the wet May and June, but now we are moving into July. July is a month where it is hard for a rally to continue on wet conditions as the crop starts to use more and more water per day.
On July 6, we got an updated view of the U.S. crop with crop conditions and progress released today. It showed a corn and soybean crop that is no longer declining in condition, but instead corn rose 1% to 69% rated G/E while soybeans were unchanged at 63% G/E. More telling, the Pro Ag yield models for both crops actually improved for the first time in weeks, with corn up 1.88 bu/acre to 163.7 bu/acre, and soybeans up 0.425 bu/acre to 44.98 bu/acre. The most significant thing about this report is that it reversed the trend toward lower crop yield projections, and now it shows the crop actually improved last week. That is in spite of a market that has rallied sharply in recent weeks, and is in direct contrast now to what the crop is actually doing in the field.
That reversal of fortunes of this year’s crop is significant in that now that the market has rallied, most producers and traders are looking for more market rallies to take place. Instead, this might be a good time to take a hard look at selling the recent rally more aggressively, and taking some of the money off the table (especially since prices are close to or above break even levels).
Price levels we are seeing now are close to the winter highs, and that might be a tipping point that prices will get close to, but with the crop now starting to improve as we move into the higher water usage months, might be price levels that do not continue long. So this becomes a selling opportunity if the crop continues to improve from here.
In other crop progress news, corn silking has dropped further behind normal at 12% silking vs. 18% normally, with soybean planting advancing only 2% to 96% complete vs. 100% normally done by now. After all, it is past July 4 so there is little crop typically planted after the fourth. Missouri specifically is only 73% planted vs. 97% normally, so most of that remaining acreage will likely be prevented planted in 2015. That does leave some bullish news on the table, but with the yield potential of planted acreage improving last week, it becomes more difficult to continue to rally on the lack of planting progress. Soybeans are 93% emerged vs. 97% normally, with 21% now blooming (equal to average).
Sunflower planting is 98% complete vs. 96% normally, with sorghum 97% planted vs. 98% normally. Sorghum conditions declined 1% to 67% rated G/E, still well ahead of last year’s 61% rating. Winter wheat is 55% harvested vs. 59% normally, but it was a good week for harvest with 17% harvested last week. Winter wheat crop ratings declined 1% to 40% G/E, with the yield model declining slightly to 48.22 bu/acre, down 0.05 bu/acre from last week. But yields are still projected to be well above USDA’s projected 44.5 bu/acre, so the July report will likely involve another hike in wheat yield projections.
Oat conditions also improved 1% to 68% G/E. HRS wheat is 76% headed, well ahead of average pace of 47% headed due to the early seeding of most HRS wheat. HRS wheat conditions, however, declined 2% to 70% rated G/E, now equal to last year’s rating. Barley is 84% headed vs. 47% normally, with conditions steady at 73% rated G/E. Pasture and range conditions remain high at 66% rated G/E, up 1% from last week but well ahead of last year’s 56% rating. Overall, the big acreage crops of corn and soybeans showed significant improvement in yield potential from last week, so that could put a damper on the recent rally and, if the yield potential continues to improve, could reverse the fragile but violent uptrend that has developed the past 3 weeks.