Market analyst: August weather could determine corn, soybean yields
The "Dome of Doom" lives on, which is the high pressure system centered in the Corn Belt.
It's remained in the central U.S. for well over a week. Warm and dry weather conditions have surged back and are forecast to continue for the next two weeks.
It's quite obvious the dome has not subsided at all. In fact, it's established itself smack dab in the middle of the Corn Belt, and rainfall is spinning out of the Corn Belt and into the West, East and South instead).
That will provide a great challenge to soybeans — essentially, the U.S. soybean yield is at risk over the next five weeks to significant yield loss.
Yesterday, the weekly crop progress revealed a rapidly declining soybean crop, with a 2% decline in the good/excellent category and a 0.29 bushel per acre decline in yield potential to 49.14 bushels in the Pro Ag proprietary yield model.
With 155 million bushel projected ending stocks and current yields between 0.7 bushels and 1.7 bushels per acre too high (1.7 bushels would eliminate our entire projected carryout), this is an extremely bullish development. To lose an additional 27 million bushles per week for the next five weeks would imply a run to $16, and eventually $18 soybeans.
The forecast is for more of the same hot and dry weather for the next two weeks, so it's not just possible, but likely we will lose 50 million bushel of soy production over the next two weeks if the forecast is correct.
Note our soil moisture is also rapidly declining, with topsoil down 5% this week and subsoil down 2% — the cushion against drought is evaporating fast! The key is, will drought last another three to five weeks or longer? Or will the weather pattern change?
For reference, the weather pattern has been nearly constant all summer — hot and dry in the northwest Corn Belt, cool/wet everywhere else. Now the hot and dry forecast is centered right smack dab in the middle of the Corn Belt.
Corn is not nearly as much at risk as soybeans for the next five weeks. Corn silking is currently 79% (6% ahead of normal), and 18% is in the dough stage (1% ahead of normal). So 18% of the corn cannot be hurt by weather today and forward; the same cannot be said of soybeans.
In fact, double cropped soybeans have virtually all the risk left for yield potential as they are mostly planted in late June and July. Corn yields can be affected, as evidenced by the 1% decline in good/excellent ratings last week to 64% rated good/excellent with the Pro Ag yield dropped 0.8 bushels per acre to 177.9 bushels (1.6 bushels below USDA).
We lost about 72 million bushels of production last week, but it will be affected less each week going forward so the max production loss now might be 3-5 bushels per acre. (about 270 million bushels to 450 million bushels). That will not eliminate the ending stocks currently projected, but it would cut it by as much as one-third.
So while corn is bullish, it's not as bullish as soybeans.
No question, current forecasts and supply conditions are the most bullish for soybeans of the year. Perhaps that means we are close in time to a market top?
Spring wheat and barley continue their rapid decline to the worst conditions in U.S. history. Spring wheat dropped 2% to only 9% good/excellent ratings compared to 70% last year; this is a disaster of historic proportions! Barley conditions declined an astounding 5% to 22% rated good/excellent (versus 80% last year).
Harvest is beginning, but it won't take long as a lot has already been harvested in the form of baled hay as the crop was a complete failure in many western areas. twenty-five percent to 75% of normal yields are expected in the East, and it won't take long to harvest that, either. But while it's being harvested, since spring wheat producers have the highest price in seven to eight years, it's likely a lot will be sold off the combine (and may pressure prices for the few weeks it takes to complete harvest).
Even sorghum conditions declined 2% (to 66%) last week as there was little rain anywhere in the U.S. production area. But most southern U.S. crops (like sorghum) are rated pretty high yet as the summer has been perfect in southern areas to date (and record yields are possible there).
Winter wheat is 84% harvested, 3% ahead of normal, and winter wheat largely escaped the drought impacts in 2021. However, lingering drought into the fall of 2021 could impact 2022 crop prospects as well.
So the next five weeks will be very interesting. What will the weather bring? Will we lower soybean yields another bushel or more, and wipe out our entire carryout currently projected? Or will rain (which currently isn't forecast) rescue the crop? It's time to place your bets, as the roulette wheel of summer weather is still spinning!
Ray Grabanski can be reached at email@example.com.