Yields continue to expand
Corn and soybean yield models continue to expand, this week moving up significantly for the second week in a row. Soybean yield models expanded by a large 0.56 bu/acre to 48.61 bu, while corn expanded 1.07 bu/acre to 177.4 bu/acre. The soybean yield is still below the very high USDA number for August of 48.9 bu/acre, but the rapid improvement in the crop in late summer only needs to continue for another week to exceed the large 48.9 USDA August yield. The corn yield expanded again to now be 177.4 bu/acre, well above USDA’s yield estimate of 175.1 bu/acre, so that is likely to be hiked in future reports and would be bearish news as well.
The Pro Farmer Crop Tour concluded last week, with a corn yield estimate of 170.2 bu/acre and soybeans of 49.3 bu/acre. So the Pro Ag yield models are now well above Pro Farmer’s corn yield, and are expanding in soybeans to the point where they are very close to the large Pro Farmer yield estimate. Pro Farmer didn’t seem to think the corn yield would beat the previous record large yield of 171 bu/acre, but the Pro Ag yield models (and USDA in their August report) seem to suggest the corn yield is larger than that.
Crop progress and condition numbers were about as expected, with the corn and soybean crops continuing to improve last week. Corn conditions were steady at 75% rated G/E, with the Pro Ag yield model going up 1.1 bu/acre to 177.4 bu/acre this week. Soybean conditions improved 1% to now be rated 73% G/E, with the yield model expanding a large 0.56 bu/acre this week to 48.6 bu/acre. The large USDA August figure of 48.9 bu/acre will be met in another week of improving soybean conditions if this continues with the great fall weather we have been having, and then carryout stocks will be as large as they are projecting in spite of record demand. So these yield model results are bearish the market, especially soybeans, as they yield model continues to advance with the excellent fall and late summer weather.
Corn progress is ahead of average, with 92% in the dough stage vs. 87% normally, and 60% dented vs. 52% normally, and 9% mature vs. 11% normally. Soybeans are 94% setting pods vs. 92% normally, with 5% dropping leaves (the average amount). So both the soybean and corn crops are ahead of average a bit, leaving them less vulnerable to frost damage than a normal year due to early planting and the warmer than normal summer.
Other crops are also developing well, with cotton 95% setting bolls vs. 94% normally, and 23% bolls opening (equal to the average pace). Cotton ratings improved 1% to now be 48% rated G/E, still down from last year’s 54% rating. Roghum is 95% headed vs. 88% normally, with 62% coloring vs. 51% normally, and 33% mature vs. 30% normally. Sorghum is, however, only 18% harvested vs. 23% normally so that is behind the normal pace. Sorghum conditions are 65% G/E (the same as last week), a high rating for sorghum for this time of year and may indicate why USDA hiked the sorghum yield so aggressively in the August report.
HRS wheat is 81% harvested vs. 62% normally at this time, with barley 86% harvested vs. 67% normally at this time so the small grain harvest is well ahead of the average pace. Oats is also 95% harvested vs. 89% normally, so that is also ahead of the normal pace.
Soybeans hit the $10.20 Nov. area last Tuesday, August 23, where we thought bean growers could make catch up sales, especially with the rapidly improving soybean crop in the field (based on yield models). We continue to target the $3.20 area for corn (hit overnight on August 30) and $9 Nov. soybeans area on the low side of prices, at which Pro Ag would target removing some hedges. With corn, let’s remove 25% of our hedges at $3.20, and target removing 25% at $3.10, another 25% at $3, and another 25% at $2.90 December futures (note we only have 20% of the 2016 crop hedged so that would be 5% total at each target).
Weather forecasts include a mixed bag for now, with scattered precip across the U.S. the coming 2 weeks and mostly above normal temps. That sounds like a good recipe to finish up the crop of corn and soybeans with little additional stress, and will likely lead to more yield model hikes before we finish out this crop year. It looks like we are going to get a record large wheat, corn, and soybean crop in 2016. And prices pretty much reflect that reality already, as we are at or near some multi-year lows for corn and wheat, and seemingly on our way there for soybeans, too.