UPDATE for July 14th, 2023
USDA Report
USDA’s July WASDE and Crop Production report was released earlier this week. his latest update saw a reduction in the expected corn yield of 181.5 bushels per acre down to 177.5. This is the first time since 2012 that the agency opted to reduce the corn yield in July. Despite the projected yield decrease from 181.5 to 177.5 the overall total production for the season increased due to the jump in June’s planted acreage number.
Soybean yields were left unchanged at 52 bushels per acre but old crop carryout increased by 25 million bushels. This was accomplished by cutting exports by 20 million while also increasing U.S. soybean imports by 5 million. The crush was left unchanged. New crop soybean exports were lowered by 125 million bushels and crush was reduced by 10 million.
The USDA reported that the precipitation data for the major corn producing states in the U.S. showed “an extreme downward deviation from average”. But they feel that “timely rainfall and cooler than normal temps” in early July will lessen the overall impact of the June weather.
With U.S. and global new-crop ending stocks larger than what the trade had anticipated, prices retreated and removed more of the risk-premium out of the prices. That’s when DEC23 corn hit a new low. Looking at the charts there is not much support to the downside until you hit $4.50 per bushel. To the upside there is some decent resistance around the $5.00 to $5.25 range. 2018-19 was the last time we encountered ending corn stocks/use ratio over 15.5% and ending stocks over 2.2 billion, very similar to what current estimates now project. Unfortunately, during that period the price of corn traded between $3.50 and $4.00 per bushel. To avoid a repeat, we either need to see a much larger cut to yield or a considerable increase in demand. Knowing this I’d say our best hope is for additional reductions in yield so weather outlooks will play a leading role in market pricing going forward.
Traders feel that the USDA’s failure to adjust the projected soybean yield was their way to “kick the can further down the road”. But for the most part soybean yields will, for the most part, be determined over the next 60 days.
Our U.S. #1 trading partner has just changed and now Mexico holds the title. Total bilateral trade between the countries totaled an impressive $263 billion during just the 4 months of 2023. Until 2014 Canada had held the top spot but was then replaced by China. That all changed this year when Mexico took over that top position due in part to the rise in their manufacturing sector.
Precipitation received from July 1st through July 12th is illustrated in the following map as it compares to the average rainfall received for the same period over the last 3 decades.
The dry weather is having an impact on crop development around the region. Each of the following 4 graphs also include the crop conditions for the crop years of 2019, 2020, 2021 and 2022 for comparison.
Graphs #1 & #2 - Across the state of Illinois, 60% of corn and 63% of the soybeans are considered to only be in fair to very poor condition.
Graphs #3 & #4- Show the condition of crops across the state of Iowa.
In Iowa 40% of the state’s corn crop is in fair to poor condition. Keep in mind, Iowa is the #1 corn producing state in the U.S.
44% of the soybean crop is found to be fair to poor condition.
The next graph is quite interesting. Notice going back over the last 20 years the agricultural impacts from drought that occur in regular cyclical pattern. With major drought impacts occurring in 10-year increments…2003, 2013 and 2023.
The weather pattern is expected to remain active next week with more hit and miss thunderstorms possible each day particularly during the afternoon and evening hours. The following EURO and GFS models show expected totals through the weekend. The final two maps show the 6-to-10-day precipitation and temperature outlooks from NOAA.
