20th Jun 2012, by Agrimoney
Brokers ushered in the start of what will start as a sweltering summer in the US by slashing forecasts for corn and soybean yields to well below official forecasts, and talking of prices of the oilseed hitting a record high.
Societe Generale warned that damage caused by hot weather to US corn prospects, now that the heat-sensitive pollination stage has begun, posed a threat to its forecast for a 161.4-bushels-per-acre yield, already short of the US Department of Agriculture's 166 bushels per acre.
"Above-average temperatures are limiting yield prospects," SocGen analyst Christopher Narayanan said, adding that forecasts showed "no significant relief is expected in the near-term.
"As such the silking [pollination] stage, and with it crop development, is not off to a great start."
Many areas of the US have already seen temperatures approach, or exceed, 100 degrees Fahrenheit, with more expected during a heatwave which coincides with the official start today of summer.
Yield downgrades
In fact, many commentators have already cut corn yield estimates below 160 bushels per acre, besides, for soybeans, beneath the USDA estimate of 43.9 bushels per acre.
Data released earlier in the week showing strong deterioration in US crop deterioration has had "trade trimming two-to-three bushels an acre from recent analysts' yield estimates of 161 bushels per acre for corn and 43.9 for soybeans", broker Benson Quinn Commodities said.
At Country Futures, Darrell Holaday said that the December corn contract, at current levels around $5.60 a bushel, was "quite likely trading a 158-bushels-per-acre yield national yield".
"If the weather the next 10 days ends up as forecasts, the corn yield will likely be closer to 155 bushels an acre than 160 and will be declining.
"Given the pace of development, the conditions the next 10 days will be very important as the crop will need more and more water."
Implications for inventories
The downgrades have lowered expectations too for the inventories which the US will be left with at the close of 2012-13, which the USDA currently pegs at 1.88bn bushels for corn, and 140m bushels for soybeans.
A corn yield at 158 bushels an acre would "likely result in an ending stock number near 1.1bn bushels", Mr Holaday said, with Benson Quinn Commodities estimating it at 1.17bn bushels.
Societe Generale, using a 157.4 bushels-an-acre yield, pegged carryout stocks at 1.16bn bushels.
'Higher prices needed'
For soybeans, an estimate of 42.5 bushels an acre forecast by one leading analyst implied a cut of 25m bushels to US harvest prospects, despite the likelihood of growers planting more of the oilseed than official data from March suggested, Benson Quinn's Kim Rugel said.
However, with inventories already forecast falling to historically tight levels, "the balance sheet cannot accommodate lower supply," Rugel said.
"Price action will now need to ration demand to ease pressure on supply."
Technically, "initial resistance is $14.00 a bushel followed by $14.55 with upside objective seen at $16.00 if dry weather pattern continues in central and eastern Midwest into July".
Chicago soybean futures hit a record $16.63 a bushel in July 2008.
Double-crop down?
In fact, US dryness acts as a depressant to soybean sowings, in deterring winter wheat farmers from planting a follow-on crop of the oilseed on land cleared by the harvest of the grain.
This could cost the US some 500,000 acres of the approximately 2m acres of these so-called double crop soybeans, respected crop scout Michael Cordonnier said.
"If the soil is bone-dry when the wheat is harvested, most farmers would wait to plant their soybeans until there is adequate soil moisture to insure germination and stand establishment," Dr Cordonnier, at Soybean and Corn Advisor, said.
"If the soil is too hard and dry they may also have a difficult time getting the no-till planter to work properly, so that is another reason to wait until they get a shower before they plant their double crop soybeans."
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