Yield models continue to rise

07/28/15 — Monday, July 27, crop conditions showed a corn and soybean crop that continues to improve in yield potential, with small gains in our Pro Ag yield models (0.14 bu/acre soybeans to 45.25 bu/acre and 0.8 bu/acre corn to 168.9 bu/acre). That is based on a 1% improvement in corn conditions to 70% rated G/E, still below last year’s excellent 75% rating. Soybean conditions were mostly unchanged at 62% rated G/E, with 1% moving from good to excellent this week the only change. However, the Pro Ag yield models continue to rise, albeit slightly, this week as the crop dries out in Missouri, Illinois, Indiana, and Ohio and continues to develop well elsewhere.

Crop development is advancing with the warmer weather recently, with corn silking at 78% vs. 77% normally, and corn dough at 14% vs. 17% normally, and soybean blooming at 71% vs. 72% normally with soybeans podsetting at 34% v. 31% normally. Sorghum is 45% headed vs. 43% normally, with 23% coloring vs. 27% normally, and ratings at 68% G/E, up 1% from last week and vs. 60% last year. Winter wheat is 85% harvested vs. 80% normally, and HRS wheat harvest has begun with 2% harvested vs. 5% normally. HRS wheat conditions are up 1% to 71% rated G/E, vs. 70% last year at this time.

Oats is 27% harvested vs. 34% normally, with conditions improving 1% to 68% rated G/E, now up from only 64% last year at this time. Barley harvest is at 5% complete vs. 3% normally, with conditions down 2% this week to 69% rated G/E, but still up from last year’s 67% rating. Pasture and range conditions are down 2% to 63% rated G/E, still a high rating and well above the 52% rating last year.

Soil moisture conditions still are rated quite high, with 75% of topsoil still rated adequate/surplus, down 3% from last week but well above last year’s rating of 58%. Subsoil levels dropped 2% to 77% rated adequate/surplus, also still well above last year’s 59% rating. With soil moisture levels still high across the country, the recent warm/dry conditions and weather forecast for another week of these conditions is actually favorable weather at this point. There will come a time when warm/dry weather will no longer be considered favorable weather (when soil moisture gets used up), but today’s extended 8-14 day forecast calls for cooling temps and more normal rainfall for the central Corn Belt – a benign forecast to say the least.

That seems to be why prices continue to erode this summer, as the June rally (as quick as it was, erasing 6 months of downtrend) was quick to turn to the July price break (losing 2/3 of the rally already in just a few weeks). Pro Ag was a strong seller of this rally in June, making 90% sales of the 2015 corn crop in catch up sales in June (much of it near the top), and selling 80% of the 2015 soybean crop in catch up sales (also much of it near the top). Even our very first scale up sale at $4.05 Dec corn and $9.65 November soybeans (which didn’t look very good in late June) is already profitable on the trade books as prices dipped even below this early sale price.

We’ve probably made all our sales for this summer now, as prices have deteriorated to levels we would no longer recommend sales. But that doesn’t mean the break is over, as prices could and probably should deteriorate back down to the summer lows (or even lower) if the crop continues to improve as we head into fall and harvest.

Pro Ag would like to have made more wheat sales this summer, too, but that market didn’t give us as much opportunity to be aggressive sellers as the corn and soybean market did. We also didn’t get the chance to make multiple year sales by selling some of the 2016 crop as well, as our targets were not hit to advance these sales last week.

Marketers might need to be patient at this point if you haven’t made sales yet, as perhaps a post harvest market opportunity will emerge? If Pro Ag yield models of corn and soybeans continue to improve, it’s likely prices will continue to retreat this fall. Although prices seems to have retreated quite fast (as we warned about earlier), they also went up in June quite fast on little actual deterioration in the national average yield estimates as made in our yield models (corn dropped from 168 to 162 bu in June while soybeans dropped from 44.9 bu/are to 44.55 bu/acre in June). In July, these small yield losses have all been erased and we now have the highest yield model estimates of the season (and they are still rising). So it is possible to erase all of the June gains, and even see prices deteriorate further in harvest. For a 2 billion bushel carryout in corn and a 425 mb carryout in soybeans are both very high carryout figures. So hang tough with those hedges for now, as things might just get worse before they get better.