Crop Ratings Collapse, Markets Up
Jul 03, 2012
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The grain markets are sharply higher this morning due to persistent hot/dry weather across the United States. Last night’s sharply higher open was based mainly on yesterday’s Crop Progress report from the USDA. In addition to a collapse in crop ratings, many private groups are lowering their yield estimates. Agronomists and crop scouts now look for national corn yields near 150bpa vs. the USDA’s current estimate of 166bpa. The USDA is virtually guaranteeing us that their yield numbers for both corn and soybeans will drop sharply on their July 11th report based on these Crop Progress reports.
US corn ratings dropped another 8% in the good-excellent category; the crop is now rated only 48% G-E, the lowest since 1988. Ratings in IL dropped 11%, OH dropped 18%, KY down 19% and IN down 8%. Even ratings for states west of the Mississippi are now deteriorating rapidly. IA was down 6%, MO down 16% and ND down 10%. Corn silking at 25% vs. 10% last week.
Soybean ratings also fell 8% and are now rated 45% G-E. Spring wheat ratings fell 6%, however the overall crop is still rated 71% good-excellent. Winter wheat is now 69% harvested vs. 59% last week.
Because of the continued drop in crop ratings, analysts continue to drop their estimates for corn and soybean yields. Noted agronomist Cordonnier lowered his estimate for US corn yield to 150bpa vs. his previous estimate (last week) of 156bpa. Dr. Cordonnier lowered his soybean yield estimate to 41.0bpa from 42.0bpa last week. Weather group Cropcast lowered their corn yield to 150.6bpa from their previous estimate of 153.3bpa. The group’s soybean yield estimate was also lowered to 40.0bpa from 40.6bpa previously.
At this point in the year, it will be very difficult for crop ratings to rebound to “normal” levels, even if a significant rain event were to occur. The market’s job right now is to price-in the assumed production shortfall in corn and soybeans as quickly and efficiently as possible. Soybean traders should keep in mind that another South American crop will be planted this fall. Traders fully expect soy acreage there to be massive due to high prices and currency action. We feel as if the upside in soybeans may be somewhat limited, relative to corn, as a result.
The grain markets close at 12:00pm CST today and are closed all day tomorrow in observance of Independence Day. The markets will not re-open until 9:30am CST on Thursday morning. Everyone have a wonderful 4th of July!