Corn and bean yields stabilize
This week’s crop conditions showed a stabilized corn and soybean yield potential, as crop conditions were basically unchanged from last week for both crops. Wheat seems to have found some bottom, at least for the time being, as we’ve dropped all the way down to the 8 year lows in Chicago wheat. Big stocks are the reason, and as is typical of bottoms, it might last a while for now as we build demand and reduce the incentive to produce more wheat.
Crop conditions yesterday afternoon showed little change in conditions, with corn at 76% rated G/E (unchanged) and soybeans at 71% rated G/E (unchanged as well). Just small changes occurred as the 1% moved in soybeans from Good to excellent, while corn stayed exactly the same. Yield models for corn were up only slightly at 174.3 bu/acre (up 0.65 bu/acre) and soybeans were up only 0.09 bu/acre to 47.04 bu/acre. Both are slightly above trend yields, so we have an above average crop in the field so far, with corn perhaps the best rated of the two relative to trend yields.
Corn is 79% silking vs. 70% normally, and is 13% in the dough stage vs. 13% normally. In Texas and the Deep South, they will begin harvesting corn in early August, so new crop supplies will become available in these parts at that time. Soybeans are 76% blooming vs. 66% normally, and 35% setting pods vs. 26% normally at this time.
Cotton development is on schedule, and conditions are down a bit from last week, down 2% to 52% rated G/E vs. 57% last year at this time, so cotton might have a slightly below average crop coming and the recent heat seems to have adversely affected the cotton crop. Sorghum is 49% headed vs. 41% normally, with 23% coloring vs. 26% normally and conditions dropped 3% this week to 65% rated G/E, still a high rating but below last year’s 68% rating.
Winter wheat is 83% harvested, ahead of the 79% normally harvested at this time. It may be time to take a stab at the long side of wheat or at least picking a bottom, as wheat prices are woeful and they have hit the lows of the last 8 years or so. Wheat prices have dropped in Chicago from the July 2012 highs for 4 years now; at some point the drop in wheat prices has to stop and even reverse itself. But it doesn’t have to occur overnight. Typically bottoms last months, though, while tops just last minutes, so we could languish around this area for a while, especially considering the large carryouts projected. HRS wheat conditions declined another 1% to 68% rated G/E, and HRS wheat harvest is beginning with yields so far quite good.
We are recommending speculators to sell Sept. wheat $4.20 puts at 10-15c to start picking a bottom in wheat, or at least recognizing there is limited downside risk from here. After all, how low can we go? Of course, after 4 years of declining wheat prices, there is nothing bullish being written about wheat prices, and with over 1 billion bushels of carryout projected currently there is no reason for wheat to go higher in the near term. That sounds like a perfect reason for wheat to bottom, though, and the fact we are at 8 year lows might be another good reason to take a stab at the long side of the market. The least risky way is to sell puts, as even if the market goes sideways for the next 2-5 months (which can happen at the lows), you can still make money selling puts. As long as corn/soybean yields aren’t expanding significantly each week (like they did the last few weeks) maybe wheat has a chance to bottom at the end of the winter wheat harvest. Of course, if corn and soybean crop weather is perfect from here on out, pressure on corn/soybean prices could spill into wheat so we do have that risk.
Today scattered rain is falling in Montana, North Dakota, and parts of Indiana and Illinois, but for the most part these are just scattered systems. Today’s 14-day forecast looks drier, with the significant rain systems mostly in the next 7 days in the eastern corn belt and southeast U.S. Otherwise, it will be mostly dry across much of the Corn Belt and could put some stress on crops in the western Corn Belt. Temps forecast are warm, with 0-4 degrees above normal in the eastern Corn Belt, but 4-10 degrees above normal in the western Corn Belt. This could stress some western Corn Belt crops within 14 days unless the forecast changes.