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Corn Crop Off to a Good Start: Future Uncertain

Jun 27, 2016

Despite a wet spring in some areas, the corn crop was planted on time and emergence as of June 26 is one percentage point ahead of the five-year average.

This week, USDA’s National Agriculture Statistics Service rates 75 percent of the national crop good/very good and only 5 percent poor/very poor. This compares with 68 and 8 percent, respectively, last year. Note in the states we serve, Iowa looks slightly worse while Nebraska is in better shape than last year. South Dakota’s crop is comparable.


State

Good/Very Good

Poor/Very Poor

June 26, 2016; June 28, 2015

2016

2015

2016

2015

Iowa

79

83

4

2

Nebraska

83

70

3

6

South Dakota

73

72

5

5


Nationally, silking is one point ahead of average, at 6 percent; in Iowa, Nebraska and South Dakota, it has not really begun.

The soybean crop also got off to a good start, with 72 percent good/very good and 5 percent in the poor/very poor categories nationally. Last year saw 63 percent in the top two and 9 percent in the bottom two.

In Farm Credit Services of America (FCSAmerica) states, Nebraska’s and South Dakota’s crops look a lot better this year, while Iowa’s ratings are slightly worse than last year.


State

Good/Very Good

Poor/Very Poor

June 26, 2016; June 28, 2015

2016

2015

2016

2015

Iowa

77

78

5

3

Nebraska

88

68

2

8

South Dakota

75

70

5

3


All but a percentage point or two of soybeans have emerged in the states served by FCSAmerica; 95 percent are out of the ground nationally. Five percent of Iowa’s beans are blooming, 8 percent of Nebraska’s and 5 percent of South Dakota’s – right on their five-year averages.

Of course, July weather is critical to corn yield and August often makes or breaks the bean crop. In its June supply/demand report, USDA’s projected yields were the same as the trend yield of 168 bu. for corn and 46.7 bu. for beans. These are based on a weather-adjusted trend model that assumes normal summer weather. USDA rarely changes its projections before August.

At a meeting late last week, Sterling Smith, agricultural analyst for Bloomberg, said he is using a 160-bu. corn yield based on the expectation that this summer’s weather will be hotter and drier than normal as La Niña kicks in. While some don’t expect La Niña to be in place until after the U.S. growing season, others see it ramping up as early as July.

That’s what has driven commodity funds to flip from a short position of 265,394 contracts on March 8 to a net long of 280,642 contracts – meaning they bought more than 546,000 contracts in just over three months, according to Smith. This provided a rally from $3.70 to $4.40 in December corn.

“Given prices as of June 20 and 160-bu. corn, estimated margins went from strongly in the red to about $29/acre of black ink,” Smith said.

Still, the industry hasn’t seen the kind of move that occurred in 2012, when funds bought a much more modest 289,253 contracts over a 60-day period and prices soared from $5 to $8.

“This suggests they may be back with more money this year if weather actually does turn adverse,” Smith said.

The situation is similar for soybeans: Fund holdings are not far short of the record long position of 259,763 contracts set May 1, 2012, after being short almost 87,000 as of March 1, 2016. November 2016 prices rose from the $9 area to $11.75 in mid-June before easing lower again.

Fundamentals look a little better for soybeans, with ending stocks projected at a not-excessive 260 million, while corn’s 2.008 billion ending stocks are among the highest in decades. Smith expects USDA’s planted acreage report on June 30 to come in with 1.85-2.1 million more acres of soybeans and for corn to be just a bit lower than intentions, probably not more than 1 million – probably not much of a surprise to traders. So it’s all about weather. And the fact that investors still have money in their checkbooks and few places to profit from it.

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