Evening Report (VIP) -- August 7, 2012

August 7, 2012 03:07 PM

NWS 6-10 DAY DRIER IN EASTERN CORN BELT... The National Weather Service forecast for Aug. 13-17 calls for below-normal precip in Missouri, Illinois and Indiana, while the Northern Plains is expected to see above-normal precip. Elsewhere across the Corn Belt, normal precip is expected. Above-normal temps are expected in western Iowa, Missouri and Nebraska south and westward, while normal temps are expected across the rest of Iowa and throughout the eastern Corn Belt. If realized, this forecast doesn't provide any drought-breaking rains to aid soybeans during pod-fill. Click here to view related maps.

CONSULTANT LOWERS CORN YIELD TO 125 BU. PER ACRE... Crop consultant Dr. Michael Cordonnier lowered his corn yield estimate by 2 bu. per acre from last week to 125 bu. Per acre but says, "there is a high probability the eventual corn yield will end up in the low to middle 120-bu.-per-acre range." He lists several factors that are contributing to the continued decline in the crop's potential, including:

  • Lower-than-normal test weights due to a lack of moisture to properly fill the kernels.
  • Early death of the corn plants resulting in incomplete grain filling.
  • Generally small kernels and poor quality grain especially in the driest areas.
  • Potential increase in molds and diseases especially if there is a period of wetness before the corn is harvested.
  • Premature ear drop due to early death of the corn plant resulting in poor grain filling.
  • Poor stalk quality due to the plant cannibalizing the stalk to fill the kernels.
  • Greater-than-normal combine losses this year due to the small ears and small kernels not being properly thrashed. Small "nubbin" ears could go right through the combine and not be thrashed at all.
  • Extremely high variability due to planting date, rainfall, temperatures, soil type, etc.

Dr. Cordonnier left his harvested acreage estimate unchanged at 83 million acres. He now forecasts total production of 10.37 billion bushels.

CONSULTANT LEAVES SOYBEAN YIELD UNCHANGED... Dr. Cordonnier left his soybean yield estimate unchanged at 38 bu. Per acre for a crop of 2.78 billion bushels. But he says he maintains a downward bias toward the crop that has a high probability of eventually ending in the 35-bu. to 38-bu.-per-acre range.

Dr. Cordonnier says he's concerned about reports soybeans have begun to turn yellow. "If seeds are immature when the yellowing started, the plant may end up with 'bb'-sized soybeans that remain green instead of normal-sized yellow soybeans," he says.

Weekend rains were helpful for the crop, but Dr. Cordonnier says the crop is further along than normal in its development. "It's more like the middle of August instead of early August," he says of the crop's maturity. "Additionally, many areas are so dry that the benefit of this rain will be shorter lived than in a normal year. A significant portion of this rainfall will be quickly tied up by the extra dry soil allowing the plant to once again be moisture stressed quicker than normal."

CONSULTANT EXPECTS 8% INCREASE IN BRAZILIAN SOYBEAN AREA... Dr. Cordonnier says Brazilian producers are finalizing their planting intentions for 2012-13 and signs point to around an 8% expansion of soybean area due to record domestic prices. Additionally, he says about half of the anticipated crop has already been forward sold.

"Much of the forward contracting has been in exchange for the purchase of needed inputs. The sale of fertilizers, seeds and other inputs indicates that Brazilian farmers could plant as much as 27 million hectares of soybeans in 2012-13, which would be 2 million hectares more than the 25 million hectares planted in 2011-12 or an increase of 8%," says Dr. Cordonnier. "Given favorable weather during the growing season, the 2012-13 Brazilian soybean production could be as high as 82 million metric tons (MMT) compared to the 66 MMT produced in 2011-12."

This means the prospect for full-season corn acreage is not as optimistic, as full-season soybeans compete for the same acres. Dr. Cordonnier expects full-season corn yields to rebound from 2012-13 to offset the decline in acreage, which if realized, would result in a slight increase in production in the year ahead. There won't be a good read on safrinha (second season) corn acreage and production until much later.

BUENOS AIRES EXCHANGE SEES ARGENTINE CORN AREA DOWN 20%... The Buenos Aires Grain Exchange today said it expects 2012-13 corn area in Argentina to decline by 20% to 3.1 million hectares. The exchange says corn planting, which should begin at the end of this month, will be influenced by reduced capital investment as producers there try to recover from last year's drought and are concerned about the still-dry soil moisture profile.

BOSTON'S FED ROSENGREN CALLS FOR FED BOND BUYING... Boston Federal Reserve President Eric Rosengren in an interview with the Wall Street Journal said the Fed should embark on an aggressive, open-ended bond buying effort to help bolster the U.S. economy. Rosengren is not currently a voting member of the Federal Open Market Committee (FOMC), but he does take part in the discussions at FOMC sessions.

Rosengren cited the July jobs data, particularly the decline in the population employment ratio which is at 58.4% and below where we started 2012. "That calls for a more substantive action than we've taken to date," he says. "We need a pro-growth monetary policy." Treading water, he added, was "not sufficient." Rosengren also believes the Fed is missing the mark on both of its mandates: maximum sustainable employment and price stability.

As for QE3, Rosengren backs an effort "at least of the magnitude that we’ve had before." He also favors no end date or a fixed amount for any such bond buying. Rosengren also wants to see the 0.25% interest rate the Fed pays banks for cash left in reserve.

Others on the Fed do not believe it needs to act, such as Dallas Fed President Richard Fisher. He told Reuters he doubts additional stimulus would trim the unemployment rate and laid blame on the inaction by Congress on the fiscal policy front as the key factor. Click here for more details and perspective on this topic.

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