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Corn deterioration heralds 'huge yield downgrade'

further sharp decline in the condition of US crops, which showed particular deterioration in the top corn and soybean growing state, has opened the door to a "massive yield downgrade" in a key report.

The US Department of Agriculture, in a weekly crop condition report, cut by eight points to 40% the proportion of domestic corn in "good" or "excellent" condition as of Sunday, the lowest figure since the drought year of 1988.

The proportion of soybeans rated good or excellent tumbled by five points to 40%, also a 24-year low, thanks to the hot and dry Midwest weather which has dashed hopes of bumper crops, and sent grain prices soaring.

'Massive yield downgrade'

Indeed, the run-up in soybean futures to a record high on Monday, and corn futures to within 2% of their own all-time top, came on "expectations that the USDA would reduce their US crop condition ratings after the session closed", Luke Mathews, at Commonwealth Bank of Australia, said.

"And the USDA did not disappoint. The deterioration in crop conditions paves the way for a massive yield downgrade by the USDA" when it on Wednesday releases the latest edition of its monthly Wasde crop report, key features of the agricultural commodities calendar.

"We think the USDA will cut corn yields to 150-153 bushels per acre," from a current estimate of 166 bushels per acre, Mr Mathews said.

A downgrade of that level would equate to some 1.2bn-1.4bn bushels (29m-36m) tonnes of corn production, factoring in the official forecast for harvested corn acres of 88.9m acres.

Commerzbank said: "Radical cuts in the yield and crop forecasts by the USDA tomorrow are inevitable."

Crops written off?

The decline in crop ratings reflected in part further deterioration in eastern Corn Belt states such Illinois, where the proportion viewed as good or excellent sank eight points to 20%, and Indiana, where the rating dropped by six points to just 14%.

Indeed, in Indiana, the condition of some crops is so poor that "some farmers and crop insurance representatives are discussing the prospect of destroying or cutting corn for forage", USDA officials said, noting "drought conditions continued to worsen" last week.

"Scattered showers brought precipitation to some areas of the state, but the intense heat negated nearly all of the benefits. Temperatures exceeded 100 degrees Fahrenheit several days during the week

"A large portion of the corn crop moved into the pollination stage under these extreme conditions."

'Condition declines significantly'

However, crops in Iowa, the main corn and soybean producing state, which had hitherto proved relatively resilient showed sharp deterioration too.

The proportion of Iowa corn rated good or excellent tumbled by 16 points to 48%, and of soybeans by 13 points to 46%, as the dropping well below averages, as calculated by FCStone, of 70.6% and 69.8%.

"Triple-digit temperatures and little if any rainfall in most areas of the state caused crop conditions to decline significantly during the week," USDA officials said, adding that "insect populations are on the rise" too.

At Iowa-based broker Market 1, Mike Mawdsley said: "Temperatures have mercifully backed off, but without a drink of water soon, the garden spot we have enjoyed to date will continue to slip."

Wheat deterioration

The data also showed a hefty decline, of five points, in the rating of the US spring wheat crop, grown in the northern states which had been spared the worst of the heat and dryness.

At 66% good or excellent, the crop was rated, for the first time this year, below 2011 levels.

However, Brian Henry, at broker Benson Quinn Commodities, sited in the major spring-wheat growing state of Minnesota, downplayed the deterioration, saying it could be a reflection of an early-developing crop.

Crop condition tends to deteriorate the nearer it gets to harvest.

Harvest about to start?

"Perhaps this is the effect of the spring wheat crop maturing well ahead of schedule," Mr Henry said.

"A few areas in this trade territory have seen some early spring wheat samples coming off above 15% moisture. With hard red winter harvest winding down in South Dakota, they should see some spring wheat harvested by the weekend.

"I guess I hear of some regions that have been trending drier, but typically most locations do not raise a lot of concern about the overall state of the crop decline."

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