The markets have been unphased with much of the bullish news lately. It is easy to find pictures of crop stress on social media, but the market wants more proof that it is widespread. Corn and soybean crop progress declined 2% and 3% respectively this week, which normally would provide some support, but when viewed in historical context, crop progress was starting from a very high place. While it seems unlikely that we will get back to 73% for good to excellent ratings, we are also a long way from last years crop progress at this time which was 58% for corn and 54% for beans. The market is saying “it is not as good as last week, but it is way better than last year.”
What's the market saying?
We have to look at what the market is telling us. We have seen the market drop despite lower crop ratings. What happens if we get good rains this week and the crop ratings go back up a couple of points? We can’t even maintain a rally on deteriorating crops. It would be plausible to assume the market would be very sensitive to any improving crop conditions.
Looking at the rain forecast in the next seven to 10 days across the Corn Belt, one could make the argument that the high is in, although I think this is premature. Forecasts can change and we have a long way to go before the crop is in the bin. Nevertheless, we have to face the reality that we are approaching the halfway point to the season.
While last month’s rally was both impressive and unexpected, I notice my 200-day moving average did not budge. The long-term trend is still down. We are getting some solid rains in southern and central Iowa, eastern Nebraska and Missouri. These were places that needed it the most. It looks like temperatures will pick up again this weekend, heading back above 90. But the following week looks to cool down with another chance of rain.
Climatologist Dr. Elwynn Taylor has developed an accumulated stress degree day model that can color map areas showing heat stress. According to Taylor, temperatures that are above 86 degrees are stressful and so tracking the number of days and regions in the Corn Belt that surpass this are helpful in determining heat damage. So far, his model shows that heat stress has been limited overall. Dryland growers in Kansas and Nebraska won’t like to read this, but the accumulated stress days are still not near as bad as what they were in 2012 overall.
The worst heat has been in the South Central Plains where they have seen highs of nearly 110 degrees. We have clients in Texas that say irrigation farms in the Panhandle are barely holding on. Land there is valued according to underground water levels that are available. The more water available, the higher the land value. I don’t know that it is much different in Iowa. Corn roots can go down 11 feet in the soil, and each foot can hold an inch of moisture. So fully charged soils can hold 11 inches of water. Plants that have to pull up moisture from 11 feet will exert more energy and take longer to do so. Land that has more topsoil with greater water holding capacity tend to command higher prices. That gives those in parts of the Corn Belt some advantage.
One of the more dominant climate trends in the Corn Belt has been overnight temperatures and how they are getting warmer. Corn, in particular, needs those heat units during the day, but then likes those cool nights. Over the last seventy years, minimum temperatures have increased by 2 degrees, most recently spiking in 2007, 2010 and 2016. This doesn’t seem like much to me, but agronomists say this can in fact have an impact on yield. This could be another year where we see warmer nights as moisture from the Gulf of Mexico is being transported up through the Corn Belt, increasing humidity.