Excellent Crop To The West, Wet Crop To The East

|
Includes: CORN, SOYB, WEAT, WEET
by: T. Marc Schober

Summary

Crop conditions were mixed throughout July.

September corn prices decreased 11.67% in July and closed at $3.71 per bushel.

The Rural Mainstreet Index released by Creighton University, reported farmland prices slightly lower in July.

The corn pollination period was another success for much of the Corn Belt in July of 2015, with adequate rainfall, wind, and heat units much like the weather experienced in July of 2014 which led to a U.S. bumper corn crop. Yet, the Corn Belt is still divided; the western region has excellent crop conditions for both corn and soybeans while the eastern Corn Belt is still very wet. Prolonged wet conditions in the East may trigger an abundance of late season disease and pest issues if the crop even survives in low lying areas.

Farmers have been busy scouting their fields for signs of late season disease or pest pressure and quickly scheduling any affected fields to be crop dusted by air. On a recent trip to southern Minnesota, we identified five separate crop dusters within a stretch of 25 miles battling an outbreak of disease or pests within the immediate area. We also note that the corn crop in central and Eastern Wisconsin is starting to show signs of heat stress already.

Crop Progress

Crop conditions were mixed throughout July. Wet and stormy weather early in the month gave way to near ideal growing conditions during the second half of July, the crucial pollination period for corn. Soybean conditions faltered as concern grew over potential disease pressure and continued wetness early in the month. Spring wheat conditions showed substantial improvement as the crop continued to experience nearly perfect growing conditions. Third party crop tours, which commence in early August, will give more details on crop conditions.

As of July 26th, the USDA Crop Progress Report estimated crop conditions for corn at 70% as "Excellent" or "Good," a 2% increase from the end of June, but a 5% decrease from last year. 21% of the crop was reported as "Fair," a 3% decrease from June, but a 2% increase from last year. 9% was rated as "Poor" or "Very Poor", a 1% increase from June.

Soybean conditions were reported at 62% "Excellent" or "Good," a 1% decrease from June and a 9% decrease from last year. 27% of the crop was rated as "Fair," a 1% decrease from June. 11% of the crop was rated as "Poor" or "Very Poor," a 2% increase from June.

Spring wheat conditions were reported at 71% "Excellent" or "Good", a 1% increase from last year. 22% was rated "Fair", and only 7% was rated "Poor" or "Very Poor."

Grain Prices

September corn prices decreased 11.67% in July and closed at $3.71 per bushel. Prices increased early in the month behind momentum from the USDA Stocks and Acreage Report released at the end of June. Prices continued to rise through the middle of the month as additional wet weather and a bullish USDA World Agricultural Supply and Demand (WASDE) Report caused further digression in the estimated crop size. Improved crop condition reports, strong farmer confidence in corn pollination, and near ideal weather throughout the second half of July caused prices to decrease.

U.S. corn production for 2015/16 was estimated at 13.53 billion bushels in the July USDA WASDE Report, a 100 million bushel decrease due to the decrease in planted and harvested acres reported in the June 30th Acreage Report. U.S. corn ending stocks for 2015/16 were estimated at 1.599 billion bushels, a 172 million bushel decrease to reflect the change in beginning stocks. The decrease in beginning stocks was due to the increased gas consumption outlook expected for 2014/15, increased corn used for ethanol, and the decrease in expected production. World corn production for 2015/16 was projected at 987.11 million tons, a 2.19 million ton decrease from last month due to lower expected production from the U.S. and E.U.

The September soybean contract price decreased 8.28% throughout July to close at $9.53 per bushel. Soybean prices reached their highest level since December 2014 after the release of the June Stocks and Acreage Report. Prices were supported in early July by strong demand reports and continued poor weather reports decreasing reported crop conditions. Prices began to sag mid-month as weather reports, began to improve along with less damaging conditions reports. Near the end of July, prices fell further as dryer weather forecasts indicated improved growing conditions during the month of August, the most crucial month for soybean development.

The USDA estimated domestic soybean production for 2015/16 at 3.885 billion bushels, a 35 million bushel increase from last month due to increased harvested area. Ending stocks for 2015/16 were estimated at 425 million bushels, a 50 million bushels decrease from last month due to decreased beginning stocks caused by an increase in crush and disappearance estimates for 2014/15. Global soybean production was projected at 318.9 million tons for 2015/16, a 1.3 million ton increase from last month due to higher production reported from the U.S. and Bolivia.

September wheat prices decreased 18.73% throughout July to close at $4.99 per bushel. Wheat prices were mostly lower through the beginning of July behind bearish USDA Export Report information. The early price declines were marginalized by poor quality reports of the winter wheat from elevators in the Wheat Belt. Prices continued to decline as July progressed. Demand reports remained bearish and dryer weather improved harvest conditions as farmers more than made up for the delays caused by heavy rains prior to harvest.

Estimated U.S. wheat production for 2015/16 was increased by 27 million bushels to 2,148 million bushels due to increasing spring wheat production estimates more than offsetting declines in winter wheat production expectations. Ending wheat stocks for 2015/16 increased by 28 million bushels to 842 million, the highest level since 2010/11. Global wheat production for 2015/16 was increased 0.4 million tons to 722 million tons, the second highest level on record.

Farmland Values

The Rural Mainstreet Index released by Creighton University, reported farmland prices slightly lower in July. "This is the 20th straight month the index has moved below growth neutral. But, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices," said Professor Ernie Goss.

Farmland sales and auction results over the last month confirmed Prof. Goss's findings. Farmers and realtors reported farmland sales ranging from as high as $11,800 per acre in southwestern Minnesota, to auctions in central Iowa missing reserve prices as low as $6,800 per acre. Another reason the index may still be below growth neutral is because the majority of farmland for sale continues to be more marginal in quality.

Outlook

Soybeans yields are created in August and farmers, who are now finished with their summer field work, will be watching the weather intently during the coming month. Corn and soybeans need moderate precipitation throughout August to support the filling stage for both crops. Warm weather is also still needed to promote growth as the crop matures toward the finishing stage.

We will be watching for the release of a number of third-party crop conditions reports that are released in August. These third-party reports provide additional perspective on the state of the crops from the USDA Crop Progress reports. In conversations with farmers and analysts, the prevailing opinion is that crop conditions in the eastern and southern Corn Belt are weaker than what is currently being reported, while crop conditions in the northern and western Corn Belt are stronger.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.