Prices are sharply lower this morning with corn down 5, soybeans down 14 and wheat down 6 on better than expected crop ratings in yesterday afternoons report.
Despite ratings slipping in Iowa, the recent rains helped boost ratings in Illinois, Indiana and Ohio. NASS pegged crop ratings for both corn and beans at 72%. Yield estimates for corn, beans and spring wheat are on the rise and traders know that the feedback farmers are providing now will be the data included in August 12th crop report.
The historically high ratings indicate a yield potential that is some 5% higher than trend and puts corn yield in the neighborhood of 184-187 bpa and the beans anywhere from 51 to 52.5 bpa. Yields of that magnitude will add substantial bushels to the 2020 production potential and ultimately ending stocks. We have to remember that for every bushel above trend adds nearly 85M bu. to the balance sheets of both.
Traders will continue to monitor the situation with China to see if they look to purchase any soybeans on the pullback in the market. With any supply issues off the table for moving the market higher, the CBOT is now in a position of finding prices that help improve demand which means lower prices!
With a higher quality crop on the horizon, there has been a lot of talk about end users and elevators adjusting discount schedules for the new crop to discourage producers from delivering old crop(2019) on new crop(2020) contracts. Higher Test Weight, Foreign Material and Damage discounts are expected as they don’t want to deal with the poor quality the 2019 crop gave us. Farmers with old crop bushels have basically run out of time and need to empty out the bins ASAP.
Have a Safe Day!