August 25, 2009

US corn and soy crops continue to look good, but they remain behind schedule and are still vulnerable to an early frost, analysts say.

 

Monday's weekly crop progress report showed that conditions for both crops improved for the week ended Sunday, defying trade expectations. The report should be a little bearish for the Chicago Board of Trade futures markets, analysts said.

 

Meanwhile, spring wheat harvesting was sluggish during the past week and is also behind schedule, but is getting closer to the finish line.

 

The USDA said that 70 percent of the corn crop was rated good-to-excellent as of Sunday, up from 68 percent the prior week. Typically at this time of year the rating drops, and analysts expected a lower rating Monday.

 

Kansas and Michigan showed the largest improvements, with increases of 10 and 8 percentage points respectively. Indiana's crop rating increased three percentage points and Iowa's climbed two percentage points.

 

The report should be neutral to slightly bearish, Jon Michalscheck, Benson Quinn Commodities analyst, said in a market commentary.

 

"The majority of the Western and Southern states indicated that last week's precipitation provided more help than the cooler temperatures in the Northern areas of country held the crop back," he said.

 

Parts of northern Indiana and northwest Ohio that were parched also received some needed rain during the past week.

 

The crop remains behind schedule, however. The USDA said 57 percent of the crop was in the dough stage, up from 40 percent last week but behind the average of 79 percent.

 

Also, just 18 percent of the crop was dented, up from 9 percent last week but far behind the average of 43 percent. In Illinois, only 12 percent of the crop was denting, compared to the average of 58 percent.

 

Jerry Gidel, analyst with North America Risk Management Services, said that while the good-to-excellent ratings usually capture the trade's attention, the development of the crop is at least as important. The crop could look "nice and green until everything freezes on the first of October," he said.

 

"It's important that we need to look at crop progress as much as we look at crop conditions."

 

The soy crop also had a bearish improvement in conditions. The USDA said 69 percent of the soy crop was rated good to excellent, up from 66 percent the prior week. Traders were expecting ratings to stay steady or decline.

 

The report could put the market on the defensive Monday night and Tuesday, analysts said.

 

"After the kind of rally we've had, there could be a little profit-taking," Gidel said. "There's nothing in here that says 'oh, no this crop is in trouble'"

 

Weather-wise, "we don't have anything too dastardly in front of us here," Gidel said.

 

Still, the crop is behind schedule and vulnerable, analysts said.

 

The USDA said 85 percent of the crop was in the setting stage, up from 72 percent last week but down from the average of 92 percent. Illinois remains well behind, with only 72 percent of the crop in the setting stage, up from 58 percent last week but down from the average of 94 percent. Indiana is not as far behind, and Iowa is almost right on schedule.

 

The USDA said 97 percent of the crop was in the blooming stage, up from 93 percent last week and down from the average of 99 percent.

 

Kim Rugel, analyst with Benson Quinn Commodities, noted in a report that the USDA did not list any progress in terms of dropping leaves. This is one or two weeks later than normal, as 6 percent of the crop was already dropping leaves at the same time in 2007.

 

Conditions declined slightly for the spring wheat crop. The USDA said that 72 percent of the crop was rated good-to-excellent as of Sunday, down from 74 percent the prior week,

 

The harvest was 22 percent complete, up from 13 percent last week but down from the average of 66 percent. In North Dakota the crop is only 7 percent harvested, compared to an average of 62 percent.

 

"Unexpected rain in North Dakota this past weekend didn't do any favours for the spring wheat crop harvest which looked to pick up this week," said Benson Quinn Commodities analyst Dave Lehl. "Humid conditions and shorter daylight hours to promote drying for cutting look to stretch the harvest out."

 

The winter wheat harvest is almost wrapped up, at 97 percent complete, up from 94 percent the prior week. The average for the week is 98 percent.