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At a time of year where we would normally be expecting corn and soybean conditions to begin to decline this years big crop is bucking the trend. Tuesday afternoon (delayed due to holiday) the USDA showed crop conditions improving for corn and soybeans. With conditions improving this late in the growing season does this mean that already big crops are getting bigger?
As of the week ending August 31st the USDA is reporting corn crop conditions at 74% good to excellent. This is a 1% increase from the previous week. This means that at this point this is the best rated corn crop in almost 20 years. This is reigniting the talk about super sized yields and bigger production estimates. While we will likely have a new record national average yield and a new record production figure will it really be as big as some of the more aggressive estimates?
The very good crop conditions and the very large production expectations highlight the potential of this corn crop. However, we may or may not realize the full potential we have out there right now. This crop conditions report also showed that the corn crop was 8% mature at this point compared to the 5-year average of 16%. So, there is a good percentage of the corn crop that is a bit behind and we are getting to the end of the growing season. An early frost, or at this point even a normal frost could cut into the potential of this corn crop and limit the upside potential of the national average yield. Most weather forecasts at this point are not looking at a catastrophic frost event, but the situation will need to be monitored closely.
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For soybeans the USDA reported the crop at 72% good to excellent for the week ended August 31st. This is a 2% increase over last week and represents historically good soybean crop conditions. This comes at a time where, like corn, we would normally expect conditions to begin to decline. This also comes after a week that saw a lot of talk about soybean disease, namely SDS and white mold. Diseases are still a concern, but this 2% increase in soybean conditions may put that discussion to rest for now.
Soybeans may have benefited the most from the consistent rains most areas have received since August 1. Late season rains may have added bushels and weight to soybean crops. Soybeans are also not as far behind as corn is. The USDA is reporting that 5% of the crop is dropping leaves compared to the 5-year average at 7% and last year at 3%. This may give soybeans a better shot at getting to the finish line but there is a lot of variance in fields right now and frost may be a limiting factor to the national average soybean yield as well. However, with soybean crops rated 72% good to excellent and a least a week or two before the first chance at a frost it seems that the soybean crop could have gotten bigger in the last few weeks.
In all big crops could be getting bigger. The potential for corn and soybeans certainly has gotten bigger with crop conditions improving. However, it will take a little more time to react full potential. Weather and when and where we get the first frost of the season will have a lot to say about how close these big corn and soybean crops get to their potential.
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December Corn Daily chart:
November Soybeans Daily chart:
December Wheat Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or email@example.com
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.