The USDA report released earlier this month was the first time we’ve seen an August report not include observations from the field.
The data consisted mainly of producer surveys along with some satellite imagery, but don’t forget these reports are reflecting the situation as of the first of the month-- in this case, August 1st.
Many came into the report, including myself, expecting big yields. With great weather in the fall of 2019 followed by an early, beautiful spring for most here in 2020, the table was set for a big crop. Given plentiful rain in most areas of the corn-belt, the average guess of traders agreed with that thought as corn and bean yields were projected just over 180 and 50 per acre respectively.
How things change
Fast-forward three weeks and my how things have changed. While many outside of the state of Iowa had enough moisture to get by coming into the month, a good chunk of the corn belt has been dry for the bulk of August. Yes, there were plenty of crops planted early this year, which lends credence to the fact the corn crop may have been far enough along to ‘make’ the crop.
With corn ratings dropping just two points this past Monday, we still see a crop rated at 69% good/excellent, but a good chunk of that drop in ratings likely has plenty to do with the storm that blew through Iowa just a week and a half ago. With sustained winds rivaling a tornado that spanned up to four counties in places, so much corn blew down in Iowa that crop ratings dropped 10% in that state alone.
A crop tour, which went through the state this past week, projected the Iowa crop at just 177.8 bu/acre, which is 25 under the USDA forecast! We must add most of the west-central to northwestern quadrant of Iowa has been building into a drought situation over the last few weeks.
For the soybean crop, we’ve seen phenomenal ratings over the last few weeks with the crop up to 74% good/excellent before dropping back to 72% this past week. Given early plantings as well as plentiful rain in June and July, pod-counts have been nothing short of impressive while producers in most states remain excited about their prospects. In fact, the crop tour found huge pod-counts in every state and projected the possibility for a better yield than the USDA projected--at 53.3 bpa, IF we see a good finishing rain.
However, beans are an ‘August crop’ and lack of rainfall can devastate a bean crop if we see dry weather during pod-fill. This bean crop has the makings of a monster crop -- no disputing that. Having the rain to finish the job is imperative, and the current forecast looks anything but friendly to soy producers.
What does this mean for prices?
I see two entirely different discussions. For beans, it’s a little easier. If you’re one of these producers looking at above APH yields, I’d consider selling a good percentage, at least half of expected production. The average producer I work with seems to be expecting yields 10 bushels above their APH. In that situation, typically ‘break-even’ is lowered by a good dollar per acre, given the recent rally, it’s hard for me to ignore the profit margins we can lock in.
For corn it’s more challenging. Given Dec corn still resides almost 50 cents below the spring price, any producer without yields safely above their APH likely has a tough time selling much corn down here. Hey, if you’re a producer who is confident your yields (at today’s prices) will produce a profitable situation, I could never argue with making sales. However, if your production is anywhere close to APH, you much know the relationship between your yields, price and potential insurance claim. I’d hate to get too many bushels sold expecting some crop insurance proceeds and then see this corn market rally. I believe a producer would be wise to keep some balance and not get too off-balance when considering locking in any level of their production.