August 7, 2007
US Crop Progress Wrap: Corn, soybean ratings down; wheat improves
Hot, dry weather conditions in the US Midwest last week helped decrease US corn and soybean crop condition ratings by 2 percentage points each in the week ended August 5, the US Department of Agriculture (USDA) said in its weekly crop progress report Monday (August 6).
However, the heat helped spring wheat crop conditions improve, with crop ratings gaining one percentage point, analysts said.
US corn crop conditions decreased by two percentage points, with 56 percent of the crop in good-to-excellent condition, the USDA reported.
"We had some challenging weather across the Midwest prior to the weekend rain," said Bill Nelson, grain analyst with AG Edwards. Beneficial rains in the Midwest during the weekend probably won't be visible until next week's crop progress report, he said.
The most significant declines appeared in the northwestern corn belt with Michigan losing 14 percentage points, with only 12 percent of the crop in good-to-excellent condition. Minnesota also saw a decline of five percentage points with 25 percent of the crop in good-to-excellent condition.
"That's an area that's been running a moisture deficit for corn and soybeans for several weeks," Nelson said.
The driest areas of the Corn Belt were either hit with rains over the weekend or are expected to receive rainfall this week, said Shawn McCambridge, analyst with Prudential.
The corn crop progress is on schedule with 41 percent of the crop through the doughing stage, compared to 40 percent last year and 34 percent on a five-year average. Nine percent of the crop is also dented, in line with the five-year average.
The decrease in crop ratings is fundamentally bullish for prices, the analysts said. However, traders will most likely pay more attention to the weather than to the crop progress reports in Tuesday's trading session as more rains are forecast in the Corn Belt this week.
The US soybean crop was reported as 56 percent in good-to-excellent condition, down two percentage points from the previous week, the USDA said.
"It's not a big surprise to see the soybean rating down a few points," Nelson said. Soybeans have also been adversely affected by dry, hot weather in the Corn Belt, the analysts said.
However, weekend rains did seem to help some of the drier crop regions in this week's report, Nelson said. Minnesota saw an increase in crop conditions by three percentage points, with 41 percent of the crop in good-to-excellent condition, while Nebraska saw an increase of five percentage points with 71 percent of the crop in good-to-excellent condition. Michigan, however, did not see an improvement and actually declined by 16 percentage points with only 14 percent of the crop in good-to-excellent condition.
Hot, dry weather with little rainfall in the southern Corn Belt also caused crop rating reductions in Missouri by six percentage points and in Tennessee by eight percentage points.
The hot temperatures pushed the crop progress ahead with 69 percent of the national crop in its setting stage, in line with last year's percentage but ahead of the five-year average of 61 percent, analysts said.
"Some of that can be attributed to the warm temperatures in some areas in the central Midwest and on to the south is helping to speed things up a bit," Nelson said.
Analysts don't expect the soybean crop condition ratings to draw too much attention in Tuesday's trading, because traders will be looking ahead to the coming week's forecasts. The crop condition decline of two percentage points was also expected, analysts said.
The US spring wheat condition ratings actually improved by one percentage point, the USDA reported, with 69 percent of the crop in good-to-excellent condition. Analysts expected a decline in crop conditions as historically, crop conditions decline for spring wheat as harvest progresses for the crop, analysts said.
Warmer weather in the northern Plains had moved analysts to expect crop condition declines, but they actually helped crop progress, moving them ahead to 29 percent of the crop harvested compared to the 21 percent five-year average, Nelson said.
Some rain did fall in crop areas, which helped improve crop conditions, McCambridge said. Minnesota had crop condition improvements of eight percentage points, with 69 percent of the crop in good-to-excellent condition. Montana also saw an improvement of four percentage points with 46 percent of the crop in good-to-excellent condition.
However, analysts don't expect traders to pay much attention to the bearish fundamental news.
"I think they're going to rely more on field reports than they are on this progress report, as far as determining yield potential," as the crop continues to be harvested, McCambridge said.
Also, strong world demand for wheat should be a stronger factor than the crop condition improvement, Nelson said.
The USDA reported winter wheat as 94 percent harvested, up from 88 percent last week, 91 percent on a five-year average and in line with last year's figure.
"We're getting close to being done," McCambridge said. "The winter wheat harvested progress is kind of a non-event."
Winter wheat harvesting progress is already thought to be entered into market prices, he said.
Oklahoma did increase its harvested percentage to 99 percent from 87 percent last week after experiencing harvest delays throughout the season because of too much moisture, analysts said.
However, some of that percentage increase might be an indication of abandonment, Nelson said.
"Maybe it just incorporates some abandonment as farmers finally concede the situation there," he said.