U.S. Midwest Greenhouse Conditions: Bigger Crop Yields

July 27, 2008

Chicago Board of Trade corn, wheat and soybean markets fell to their lowest levels in months last week as 2008 U.S. crop prospects keep improving. 
    Corn was the hardest hit, falling to a four-month low, as greenhouse like conditions across the U.S. Midwest during July are raising ideas that crop yields are improving from earlier expectations. July is the most critical month for determining corn yields as it pollinates this month. Basically the crop is in the midst of pollination with little to no stress.
    “When it rains in July it means bigger crops,” said Roy Huckabay, analyst with The Linn Group in Chicago. “Corn acts tired.”
    Other analysts and traders said they too are hearing more talk of bigger corn yields, up from USDA’s current forecast of 148.4 bushels per acre, compared to last year’s national average of 151.1 bushels an acre.
    USDA’s August 12 crop report will be the first of the season to project corn yields based on actual field surveys. It will also include data from a special survey of Midwest crop fields hardest hit during the June floods to get a more accurate read on total U.S. corn and soybean acreage.
    Given the mild weather over the past week, traders expect the government to report in its weekly crop progress update late Monday that U.S. corn and soybean ratings improved the past week. Last week USDA rated 65 percent of the corn crop and 61 percent of the soybeans good to excellent.
    The weekly data should also show that the U.S. winter wheat harvest is nearly complete, with the northern region the last to finish up.
    Soft red winter wheat basis levels continue to sink as big supplies flow into Midwest terminals. The spot basis at the Gulf was $1.60 under September futures late Friday, traders said, as grain dealers are discouraging more deliveries  wanting to keep enough storage open for corn and soybeans to be harvest this fall.
    The week ahead for CBOT markets promises to provide lots of volatility. Key factors traders will be watching include:
. Weather forecasts. Any switch from the current benign weather pattern could help corn and soybeans to recover, bringing wheat along. August corn failed to end the week about $6 a bushel, despite the rally on Friday when corn benefited from spillover buying in wheat.
. CFTC meeting. The Commodity Futures Trading Commission is meeting on July 29 in Washington with representatives from U.S. grain industry and the CME Group, parent of the CBOT, to discuss the contract performance of CBOT contracts. CME met with Chicago traders and grain officials last week in Chicago to come up with suggestions that will be among the ideas presented at Tuesday’s meeting. 

Photo: Pollinating Illinois corn of variable growths due to late planting or flooded soils early in the season. Photo taken near Bolingbrook, located 30 miles west of Chicago, on July 27 by Peter Bohan. 

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