CME: Crop Condition Ratings Not as Bad as Expected

US - You know you are in trouble when things are better simply because they aren’t as bad as they were expected to be. Such is the case with the corn market this evening after USDA’s crop condition ratings came in terrible but not quite as bad as expected in today’s Crop Progress report, write Steve Meyer and Len Steiner.
calendar icon 26 June 2012
clock icon 5 minute read

As can be seen below, this week’s good/excellent rating percentage of 56 per cent is 7 per cent lower than on week ago, 12 per cent lower than last year’s 68 per cent for the same week. It is also 10 per cent lower than the average of the past 10 years and even 1 per cent lower than the crop rating for this week in 2002, our worst year since 1990.

But it wasn’t quite as bad as the market expected and corn futures are all marginally higher in electronic trading this afternoon and evening.

Still, this corn crop is in trouble ins some important areas. The most serious is Indiana where the share rated good or excellent fell from 37 per cent last week to 27 per cent this week. Perhaps more important, the share rated poor or very poor grew from 24 per cent last week to 36 per cent this week. Illinois, the number 2 corn state behind only Iowa, is the other state of concern as its share in the good/excellent categories dropped 15 per cent last week to only 37 per cent. Illinois’s porr/very poor share jumped from 13 per cent to 22 per cent this week. Nationally, 16 per cent of acres were rated poor or very poor this week compared to 9 both last week and one year ago.

The western Cornbelt, much of which received some amount of rain last week, still has a large majority of acres rated good or excellent — at least for now. Minnesota, about which we were very concerned when planting started, is the garden spot with 83 per cent of acres in the top two categories. It is followed by North Dakota (91 per cent good/excellent), South Dakota (71 per cent), Iowa (68 per cent) and Nebraska (60 per cent). Missouri and Kansa are the trouble states in the west at 34 per cent and 40 per cent Good/Excellent, respectively.

And things are no better for soybeans. This week’s 53 per cent good/excellent share is the lowest for this week since 1988 when the last great Midwestern drought has only 17 per cent of soybean acres so rated for this week. Since our “worst” in the chart above goes back only to 1990, the 1988 data do not appear there. This week’s 53 per cent compares to 65 per cent last year and a 10-year average of 64.5 per cent good/ excellent in week 25. It is 3 per cent lower than last week’s figure.

The trouble spots for soybeans are, as expected, virtually the same as those for corn. Good/excellent shares dropped shrply in Illinois (-12 per cent to 35 per cent for the week), Indiana (-8 per cent to 24 per cent), and Michigan (-10 per cent to 49 per cent). Good/excellent shares remained above 60 per cent in Iowa, Minnesota, the Dakotas and Mississippi. AS with corn, Missouri is the sore spot in the west with only 26 per cent of acres rated good/excellent and 35 per cent rated poor/very poor.

But what does all of this mean for potential yields? The answer is “Not much” if one looks at the historical relationships. The chart below shows final annual yields as well as week 25 and week 26 good/excellent crop percentages. We present two weeks simply because this crop is farther along than normal and comparing to week 26 may be more appropriate.

There are clearly years with poor ratings and good yields (1992, 2005, 2008) and with good ratings and poor yields (1991, 1997). The correlations are abysmal with week 25’s correlation to final yield being 0.3236 and week 26’s being 0.2879. 1992 and 1993 are the only two other years that really compare to this year at this time and one of them saw a yield roughly 11 bushels higher than trend while the other saw a yield over 20 bushels lower than trend. The latter, 1993, was of course a year of flooding and extremely wet conditions on millions of acres that did not flood. Do we really compare it to a year of dry, hot conditions?

The story for soybeans is much the same — as can be seen in the chart below. The correlations here are a bit better (0.3963 for week 25, 0.33236 for week 26) but nothing close that anything we would want to take a risk on.

Obviously — Many things could yet change!

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