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
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.
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
portion of the corn crop moved into the pollination stage under these extreme
'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%.
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.
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."
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
At 66% good or
excellent, the crop was rated, for the first time this year, below 2011 levels.
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.
tends to deteriorate the nearer it gets to harvest.
Harvest about to start?
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