For much of the growing season, we have been worrying about dryness in the Midwest. Anecdotal evidence has held that much of the prime U.S. growing area for corn and soybeans has been too dry. The exception has been in the east.
Now, as the crop is getting wrapped up and harvest has actually started in the South, farmers are saying that timely rains are keeping them going, and even the driest areas of the Dakotas and Minnesota are scoring thunderstorms.
For some of the Northwest, it is too late. For most of Minnesota, crops have been hurt but will yield well. For the Eastern Corn Belt, especially for most of Ohio, the crops will be exceptional.
The result is our original soybean yield projection by the U.S. Department of Agriculture has been faded to 50 bpa, with most observers going along with that. The estimates for corn yields vary from 172 to 177 bpa, which is still at or near the trend line, and higher than we would have thought for all of the talk.
Better than expected
USDA crop condition reports, which came out Aug. 30, put the crop condition better than what the trade was talking about. The U.S. was thought to be 60% good and excellent, the same as last week. Many were expecting the ratings to decline a little.
Ohio corn was rated at 77% good and excellent, far above the national average and leading in the East. Illinois is rated at 70%, and Indiana at 69%. The soybean condition was rated at 56% good and excellent, the same as last year. Ohio was the number two state in the Eastern Corn Belt, at 68%. Illinois led, at 71%, and Indiana had 66%.
These numbers confirm the idea in the trade that the excellent crops in the East make up for the burnt-up crops in the Dakotas. They also confirm that Ohio has a relatively poorer soybean crop than Illinois. I attribute that to too much rain in July, which left soybeans yellow in my neighborhood.
Looking over all this, I remember that Pappy always said the dry years scare you to death, but the wet years starve you to death. This is especially true in northeast Ohio. This year, it was the dry year scare, which is very real in the Central and Northwest Midwest, which normally is short for rain, unlike us.
Effect on the market
The result of the return to thinking that we will have a good crop is that the markets are staggering around near their recent lows. As this was written Aug. 31, the early trading had both corn and soybeans down about a nickel.
December corn futures were trading at $5.371⁄2, down five and a quarter cents. The November soybean futures were trading $12.973⁄4, down 51⁄2 cents.
For perspective, the December corn futures had a recent high of $5.941⁄4, Aug. 12 . The recent low was $5.291⁄2, Aug. 22, so you can see we are not much above the recent low, and a long way from the recent high.
Similarly, the November soybean futures were as low as $12.401⁄2, Aug. 20. We traded a recent high of $13.793⁄4, Aug. 17. On Aug. 31, we were at $12.973⁄4, so, like corn, we were a lot closer to the low.
Harvest coming
With the main harvest starting for soybeans in a couple of weeks, it is hard to think we get stronger until we get through harvest. Then, we might count bushels and start remembering how tight the whole crop year might be for supply, just like this year.
That applies to corn, too, especially since the final yield is still a little more suspect. It is typical for farmers to neglect to watch the markets during harvest. That might not be as dangerous this year as it is in some years. We may have already made the harvest lows if we continue to hang on here.
Prices that are down a nickel today get me nervous that we are making another run at lows, but the demand picture and our limited carry out, just pipeline supplies we believe, encourage us to hang on to the new crop as far as room and marketing alternatives allow.
Last week, December corn futures gained 163⁄4 cents. November soybeans gained 321⁄2 cents, but that was only half of what they lost in a tough week before that. We were giving some of the gains back Aug. 31.
It remains to be seen if we will give back more, but I remain bullish because of the low carryout we are projecting for a year from now.
