Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Crop Conditions Cut and a Few Thoughts on Soybeans
Jul 16, 2012
US crop production estimates continue to slide as the USDA announced another round of major cuts to corn and soybean conditions. As I mentioned yesterday the trade seems to be thinking US corn production could end up below 11.0 billion bushels as corn yield estimates potentially fall below 130 bushels per acre. I am telling you now with extreme daytime and nighttime temps continuing to be forecast across the corn belt yields are taking a massive hit each and every day. There are reports circulating that corn in fields that have had adequate rainfall are still seeing a 1-3 bushel reduction each day in yields as temps continue to push the upper limits. In fields that have seen inadequate rainfall totals the corn maybe loosing 3-6 bushels of yield per day because of the extreme temps! Below are a few highlights from today's USDA numbers.
- Corn "Poor-to-Very Poor" conditions jumped to 38%. Kentucky now showing 77% of their crop rated P/VP; MO 72%; IN 71%; TN 55%; IL 56%; MI 56%; KS 51%; OH 47%; WI 43%; IA 27%; NE 27%; SD 27%
- Corn "Good-to-Excellent" condition dropped to just 31%, down big from last weeks estimate of 40%. Last year 66% of the US corn crop was rated GD/EX. Illinois now with just 11% of their crop rated GD/EX; NE 43%; SD 37%; IA 36%; WI 30%; OH 19%; MI 18%; KS 15%; IN 8%; MO 7%; KY 6%
- Corn "silking" was reported at 71%, which is twice the 5-year average of 36%. I should also note that 12% of US corn crop in dough stage compared to the 5-year average of just 4%.
- Soybean "Good-to-Excellent" conditions drop another 6% now down to 34% rated GD/EX. Last year we were at 64% rated GD/EX at this time. Missouri now just with 10% of their soybeans rated GD/EX; SD 41%; IA 38%; NE 34%; WI 30%; OH 22%; IL 17%; IN 11%;
- Spring wheat conditions down slightly in comparison to last week. 65% of the crop now rated in GD/EX condition compared to 66% last week and 63% last year. South Dakota starting to see the biggest setbacks.
Soybeans continue to be a major concern, as the market will soon start talking about the plants aborting pods. Soybean bulls are also pointing out the fact not only is the yield a concern but so are "harvested acres." There is some talk in the trade that soybean harvested acres could be cut by 300,000 to 700,000 in the blink of an eye. There is also some talk that planted acres could be too high as well with many producers simply unable or unwilling to risk throwing the beans in the ground considering the hot, dry conditions. I still see an impossible soybean balance sheet situation moving forward and believe the current USDA numbers simply do not recognize the global "demand" situation. The USDA obviously believes the higher prices will drastically curtail the demand, but my question is how high will prices have to go before we see this happen $18..$20..$22...or possibly even higher??? Who knows right now. What I can tell you is that not only will China be exclusively importing soybeans form the US in a couple of months but so will South America. Tell me then how the balance sheets will look and if "demand" has tapered off. The soybean situation is serious and becoming more serious by the day, August rains or no August rains we are going to eventually run out of supply. How we get to these higher prices still remains a mystery, but it wouldn't surprise me to see some profit taking in the next few weeks, followed by another round of rallies in the late summer to early fall time period. Remember, this soybean rally is going to end up being a "demand" driven market. I have learned through the years "demand" driven markets almost always give you a chance to get back in on the breaks so be patient and do NOT chase the rallies. Producers can entertain buying puts with the thought of trading them rather than holding them. Simply meaning to buy your puts for protection just in case of a major break, but be willing to liquidate them and bank the profits before prices turn back around and move to higher ground.