With July behind the markets, traders and analysts will be attempting to hone in on what yields will look like when harvest begins. Due to the lack of moisture and excessive heat that hit many areas in the Midwest toward the end of July, those expectations may be fairly volatile.
“Due to less-than-ideal growing conditions, expect both corn and soybean yield projections to show a change in August, with both figures likely to be lower,” said Bryan Doherty, market analyst with Total Farm Marketing. “While crop ratings have stabilized, they are still considered the second worst since 2012.”
Doherty said a lack of change in this year’s USDA yield estimates may make for some significant changes in the August Supply and Demand report after “kicking the can down the road” in July.
Soybean yields are estimated at 52 bushels per acre currently, but Doherty expects that to fall as crop conditions may not be conducive to matching the 2016 all-time high of 51.9 bushels per acre.
Corn yields are currently estimated at 177.5 bushels per acre, which would be a record. However, in the dry year 2012, the final yield for corn was dropped to 123.4 bushels per acre nationally despite starting at 165. While hybrids are more resilient now, current estimates may still be too high, Doherty said.
“Changes in yield projections will likely increase price volatility,” Doherty said. “If the USDA does lower yield, it could give prices a reason to rally. However, also expect usage to be reduced, with the current slow export pace and smaller beef herd.”
Doherty said farmers should look at higher prices to target in the event of a rally and make some put options to build a floor for unsold crop. He also said a smaller overall crop tends to create increasing basis levels.
“That leaves upside price potential unlimited,” he said. “Concentrating on strategy can prepare you for any price movement, rather than trying to guess how the market will move. Whatever your situation, be ready for price movement in the weeks ahead.”
