July 7, 2009

The condition of US corn, soy and spring wheat deteriorated a bit last week, the US Department of Agriculture said Monday (July 6) in its weekly crop progress report.

The USDA lowered its good-to-excellent ratings for the three crops from the previous week and confirmed that their development is behind schedule in some areas. The condition of US winter wheat improved as harvest progressed.

The USDA said 71 percent of US corn was in good-to-excellent as of Sunday, down one percentage point from last week. Analysts had expected to see the rating stay unchanged or increase one percentage point.

"It seems to me the expectations were steady to better in corn and beans," said Jerry Gidel, analyst for North America Risk Management Services. "We didn't really have that."

The ratings for Iowa and Indiana, two key growing states, were up from a week ago, but the rating for Illinois slipped. Iowa's crop was rated 82 percent good to excellent, up 1 percentage point from last week, and Indiana's crop was rated 64 percent good to excellent, up two percent points from last week, according to the USDA. The crop was 57 percent good to excellent in Illinois, down 1 percentage point from the previous week.

Overall, the crop was 8 percent silking, compared to 5 percent last year and the average of 16 percent, according to the USDA. In Iowa, none of the crop was silking, compared to the average of 4 percent, it said.

Development was more behind schedule in Illinois and Indiana. The crop was 2 percent silking in Indiana, compared to the average of 17 percent, and 5 percent silking in Illinois, compared to the average of 31 percent, the USDA said.

The slow silking rate is "starting to make people a little nervous" as the development of the crop remains slow despite favourable weather, Gidel said. Still, the crop progress report should not have a major impact on Chicago Board of Trade corn futures, "partly because of the fact that the weather out in front us in the short-term forecast isn't all that outrageous," he said. Weather for corn and soy are expected to be favourable for the next week, according to forecasts.

Soy were rated 66 percent good to excellent as of Sunday, compared to 68 percent last week, according to the USDA. The rating was below expectations, with traders expecting to see the condition rating stay unchanged or rise one percentage point from last week.

Despite the lower overall rating, the condition of the crop improved in some key states. In Iowa, the good-to-excellent rating rose two percentage points from last week, to 80 percent. In Illinois, 60 percent of the crop was seen as good to excellent, up five percentage points from last week.

Other states that are less important soy growers saw significant declines. In South Dakota, the good-to-excellent rating dropped nine percentage points, to 55 percent. In North Carolina, the rating dropped 23 percentage points, to 51 percent.

The decline in the overall condition rating has the potential to "make people a little more nervous in the soy than the corn" because the soy market is already worried about a tight supply situation, Gidel said. CBOT soy "could get a little bit of spark out of" the crop progress report, he said.

Overall, soy was 96 percent emerged, compared to the average of 98 percent, and 14 percent blooming, compared to the average of 24 percent, the USDA said. In Iowa, 97 percent of the crop was emerged, compared to the 99 percent average, and 23 percent was blooming, compared to the 28 percent average. In Illinois, 94 percent was emerged, compared to the average of 99 percent, and 4 percent was blooming, compared to the average of 29 percent, according to the USDA.

 The USDA rated 72 percent of spring wheat as good to excellent as of Sunday, down from 76 percent a week ago. In North Dakota, the top spring wheat-growing state, the good-to-excellent rating fell one percentage point from last week, to 84 percent.

In South Dakota, the good-to-excellent rating dropped to 62 percent, from 73 percent last week. Montana's rating dropped to 60 percent from 67 percent.

Despite the reductions, spring wheat condition ratings still look generally good, analysts said. The crop was planted late in many areas of the northern Plains due to a cool, wet spring.

Delayed planting has delayed the development of the crop, analysts said. Spring wheat was 30 percent headed as of Sunday, compared to the average of 65 percent, according to the UDSA. North Dakota's crop was 17 percent headed, compared to the average of 63 percent.

The USDA said 47 percent of US winter wheat was in good-to-excellent condition as of Sunday, compared to 45 percent last week. Analysts had expected to see the rating remain unchanged.

The crop in Kansas was rated 63 percent good to excellent, up 11 percentage points from last week. Kansas is the country's top producer of hard red winter wheat, used to make bread.

"I guess with the harvest coming along there, some of the poor thinkers about the wheat yield in Kansas were pleasantly surprised with what they got," Gidel said.

In Ohio, 75 percent of the crop was rated good to excellent, down one percentage point from last week, according to the USDA. In Illinois, 49 percent of the crop was rated good to excellent, unchanged from the previous week. Ohio and Illinois grow soft red winter wheat, used to make pastries and snack foods.

Harvest was 56 percent complete as of Sunday, compared to 52 percent last year and the average of 59 percent, the USDA said. Citigroup had estimated harvest would be 59 percent complete.

Cutting is nearing completion in the southern US Plains. Harvest was 83 percent complete in Kansas, compared to the average of 84 percent, and 98 percent complete in Oklahoma, compared to the average of 91 percent, the USDA said.

Ohio's crop was 17 percent cut, compared to the average of 24 percent, the USDA said. Harvest was 62 percent complete in Illinois, compared to the average of 82 percent.