In its latest North American ag review, Rabobank economists see a bright picture for corn yields, continued lower yields for Hard Red Winter wheat, and a soybean import forecast that will be difficult to reach.

Meanwhile, the climate for ag production is likely to favor corn and soybean production, while the likelihood of experiencing and El Nino cycle this year increases.

Highlights of the report:

Corn
Good growing conditions and a relatively normal planting pace is keeping corn crops in a strong position to move into pollination next month, Rabobank analysts say, though the assumed record national yield of 165.3 bushels per acre this year is causing market skepticism.

Rabobank report sees likelihood for El Nino, bearish grain prices

With only two years over 160 bpa – 2004 and 2009 – Rabobank says 162 to163 bpa for 2014 may be a better estimate.

Cash markets associated with exports continue to be the top bidder for old-crop; prices remain better in the exports draw areas around the Mississippi, Illinois and Ohio Rivers, the report says.

The market continues to prepare for the June 30 stocks and acreage reports, which Rabobank believes will be neutral.

Soy
Tightness in old-crop soybeans continues as soybean exports are at record levels and NOPA crush is at a high pace, analysts say.

Meanwhile, USDA's import forecast will be difficult to reach – 14.9 million bushels must be imported per month for the remaining four months of the crop year to touch the forecast of 90 million bushels.

Soybean meal exports are also running at record pace, driven by strong domestic and export demand for U.S. soymeal, the report says.

Wheat
As the winter wheat harvest continues, questions about production volume continue to go unanswered. In some areas, harvest is stalled due to late rains.

The wheat crop struggled all season anyway, says the report, and years with crops rating less than 25% good to excellent condition by week 24 have averaged 33 bpa, compared to the normal average of 40.

Unless yields begin to improve, Rabobank expects the Kansas City Board of Trade Hard Red Winter wheat to lead the price complex to the upside.

Climate
While rains benefit the Midwest, the far West continues to struggle with drought conditions. The near-ideal growing conditions – save for the occasional flooded field – appear to be favorable to corn and soy. Water-related crop loss is uncertain.

The likelihood of an El Nino cycle – which results in cooler summers and more precipitation – becomes stronger daily, the report says. Though the outlook remains bearish for grain prices, and an El Nino would make it more so, a strong 2014 harvest is "critical in light of the uncomfortably tight domestic corn and soybean supplies," the report says.