Mid Week Comments

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Dome Bullish Soybeans - 07/27/21

The 'Dome of Doom' lives on, which is the high pressure system centered
in the corn belt (and has been for well over a week). The forecast today
has surged back to warmer/drier in the 14 day forecast, and its quite
obvious the Dome has not subsided at all. In fact, its established
itself smack dab in the middle of the corn belt, and is spinning rainfall
off it (in other words, out of the corn belt) and into the west, east,
and south instead). That will provide a great challenge to soybeans -
essentially, the US soybean yield is at risk the next 5 weeks to
significant yield loss.

Yesterday, the weekly crop progress revealed a rapidly declining soybean
crop, with a 2% decline in the G/E category (to 58%) and a 0.29 bu/acre
decline in yield potential (-27 mb) to 49.14 bu in the Pro Ag proprietary
yield model. With 155 mb projected ending stocks and current yields
between 0.7 bu and 1.7 bu/acre too high (1.7 bu would eliminate our
entire projected carryout), this is an extremely bullish development. To
lose an additional 27 mb/week for the next 5 weeks would imply a run to
$16, and eventually $18 soybeans. The forecast is for more of the same
weather (hot/dry) for the next 2 weeks so its not just possible, but
likely we will lose 50 mb of soy production the next 2 weeks if the
forecast is correct. Note our soil moisture is also rapidly declining,
with topsoil down 5% this week and subsoil down 2% - the cushion against
drought is evaporating fast!!! The key is, will drought last another 3-5
weeks or longer??? Or will the weather pattern change??? For reference,
the weather pattern has been nearly constant all summer - hot/dry in the
northwest corn belt, cool/wet everywhere else. Now the hot/dry forecast
is centered right smack dab in the middle of the corn belt.

Corn is not nearly as much at risk as soybeans the next 5 weeks (mostly
August). Corn silking is currently 79% (6% ahead of normal), and 18% is
in the dough stage (1% ahead of normal). So 18% of the corn cannot be
hurt by weather today and forward; the same cannot be said of soybeans.
In fact, double cropped soybeans have virtually all the risk left for
yield potential as they are mostly planted in late June/July. Corn
yields can be affected, as evidenced by the 1% decline in G/E ratings
last week to 64% rated G/E, with the Pro Ag yield dropped 0.8 bu/acre to
177.9 bu (1.6 bu below USDA). We lost about 72 mb of production last
week, but it will be affected less each week going forward so the max
production loss now might be 3-5 bu/acre. (about 270 mb to 450 mb). That
will not eliminate the ending stocks currently projected, but it would
cut it as much as 1/3. So while bullish corn, its not as bullish as
soybeans.

No question, current forecasts/supply conditions are the most bullish for
soybeans of the year. Perhaps that means we are close in time to a
market top? In the weekly seminar Saturday morning (link below), we
outlined some great reasons why current corn/soys chart patterns do not
look like typical market tops. But perhaps it is coming shortly???

We note HRS wheat and barley continue their rapid decline to the worst
conditions in US history. HRS dropped 2% to only 9% G/E rating compared
to 70% last year; this is a disaster of historic proportions!!! Barley
conditions declined an astounding 5% to 22% rated G/E (vs. 80% last
year). Harvest is beginning, but it won't take long as a lot has already
been harvested in the form of baled hay as the crop was a complete
failure in many western areas. With from 25% to 75% of normal yields
expected in the east, it won't take long to harvest that, either. But
while its being harvested, since HRS wheat producers have the highest
price in 7-8 years, its likely a lot will be sold off the combine (and
may pressure prices for the few weeks it takes to complete harvest).

We note that even sorghum conditions declined 2% (to 66%) last week as
there was little rain anywhere in the US production area. But most
southern US crops (like sorghum) are rated pretty high yet as the summer
has been perfect in southern areas to date (and record yields are
possible there). Winter wheat is 84% harvested, 3% ahead of normal, and
winter wheat largely escaped the drought impacts in 2021. However,
lingering drought into the fall2021 could impact 2022 crop prospects as
well.

So the next 5 weeks will be very interesting. What will the weather
bring??? Will we lower soybean yields another bushel or more, and wipe
out our entire carryout currently projected??? Or will rain (which
currently isn't forecast) rescue the crop??? Its time to place your
bets, as the roulette wheel of summer weather is still spinning!!!

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Reference our 10 minute weekly seminar every Saturday morning at
www.progressiveag.com/videos, and click on the most recent recording.
You might be surprised how much you can learn about markets in such a
short period of time!!!

Ray can be reached at raygrabanski@progressiveag.com.
+++++++++++++++++++++++++++++++++++++++++++++++++++
Ray is President of Progressive Ag Marketing, Inc., a top Ranked
marketing firm in the country. See http://www.progressiveag.com for
rankings and link to data from Top Producer Magazine and Agweb.com.

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