Corn, Soybean Exports Fall Says USDA

A Friday report from the U.S. Department of Agriculture said exports for corn and soybeans dropped for the week ending August 30.

Corn exports plummeted to 235,400 metric tons, down 37 percent from the prior week, and a huge 55 percent from its four-week average. Major buyers were China, Japan, Taiwan, Mexico, Cuba and Jamaica.

Soybean exports plunged to 414,300 metric tons, dropping 23 percent from the prior week, and 16 percent from its four-week average. Major acquisitions came from China, Taiwan, Indonesia, Thailand and Mexico.

Corn exports for the marketing year ending August 30 dropped 16 percent from the previous year. A stronger U.S. dollar and higher corn prices were the impetus behind the lower exports.

Exports for soybeans were lower by 8 percent for the same time period.

The largest importers of U.S. corn were Japan, accounting for 31 percent of the total; Mexico with 25 percent; and China with 13 percent.

As usual, China was the largest importer of U.S. soybeans, acquiring 64 percent of all U.S. soybean exports. Mexico was far behind at 8 percent.

Drought Results in 1,584 Counties Being Declared Natural Disaster Areas

The ongoing drought has added another 218 counties to the natural disaster list of the U.S. Department of Agriculture, bringing the total in 32 states to 1,584, over half of the counties in those states.

How the USDA determines whether or not to include a county as being a natural disaster is U.S. Drought Monitor. What the designation means for farmers in those counties is being eligible for federal aid.

Agriculture Secretary Tom Vilsack announced that the government will open up as much as 3.8 million acres of conservation land for ranches to use for their livestock.

"The assistance announced today will help U.S. livestock producers dealing with climbing feed prices, critical shortages of hay and deteriorating pasturelands," Vilsack said.

Concerns are the income of farmers will be hit hard, exasperated by the strengthening of the U.S. dollar, which will continue because of the inaction of the Federal Reserve and ECB, which had been expected to take immediate action to stimulate the economy.

That's important because it puts pressure on exports when the U.S. dollar is higher. It also points to how weak the eurozone really is when they've had favorable trading conditions in light of the weak euro.

As for corn, approximately half of the corn crop in the United States is now rated poor to very poor, according to the USDA's National Agricultural Statistics Service.

Soybeans are now under pressure as well, with about 37 percent of the U.S. crop now being considered poor to very poor.

Corn, Soy Outlook Continues to Weaken

The prospects for corn, and increasingly, soybeans, continue to deteriorate, according to the U.S. Department of Agriculture, which said in its latest report that corn in good-to-excellent condition as of Sunday stood at 24 percent and soybeans in the same condition were at 29 percent; both of them dropping 2 percent from last week.

This is the worst ratings of both crops since the devastating drought of 1988.

Even though there was some improvement is several states in the Midwest, the largest corn and soy producing states - Iowa, Illinois, Nebraska and Minnesota had their ratings drop from a range of 2-5 percentage points for corn and 3 to 4 percentage points for soybeans.

Corn has been hit so hard that it is rated 41 percentage point under the five-year average. At this time it's only 5 percentage points above the good-to-excellent rating it had during the same week in 1988.

The soybean rating was 34 percentage points under the five-year average and 10 percentage points over the same week in 1988.

There is little hope of relief in the next 10 days or so either, as less than an inch of rain in predicted throughout the period.

While the stress on the two crops have been slightly eased lately, they will continue to be under pressure going forward, according to agricultural meteorologists.

No soaking rains are expected, and the belief is both crops will continue to falter.

Little Rain for Iowa, Illinois, Nebraska, Kansas and Missouri

While some states will benefit from some cooler weather and rain, major corn and soybean producers Iowa and Illinois will get little relief from drought conditions, and neither will Nebraska, Kansas and Missouri.

Missouri's corn crop is already almost a total loss, and Indiana's isn't much better. Whether rains come in those two states in regard to corn won't have any positive impact on the yields.

Rains are predicted to move into the overall Midwest next week, but projections are only for up to one half inch at most for most areas.

The majority of Iowa, Nebraska, Illinois, Kansas and Missouri will probably only get at most a tenth of an inch or rain, while the states of Michigan, Minnesota, Wisconsin, northern Illinois and Ohio will get from .5 to an inch of rain. Combined it generates the .5 inches of rain mentioned earlier for the Midwest.

Some parts of Iowa and northern Missouri could also get on average about .5 inches of rain over the weekend. As usual, rain will be scattered and unpredictable as to how much it will help drought-stricken regions. But overall it doesn't look good.

In other words, the states with the majority of the corn will continue to suffer drought conditions, putting even more downward pressure on corn yields.

The conservative reports from the U.S. Department of Agriculture should come in with another drop in projected corn yields on Monday, and possibly more for soybeans; although some have benefited from the recent rains in the Midwest.

Most grain experts have about 20 bushels per acre less in yields projections for corn than the USDA has at this time. That should come closer to one another on Monday, depending upon whether private analysts even further downgrade expected corn yields.

In the middle of next week the Commodity Weather Group (CWG) says temperatures in the mid 90s to 100s will probably return Wednesday and into Thursday at least.

According to the CWG, other crops starting to feel the impact of the drought, besides soybeans, are rice and cotton.

Corn Reports on Indiana Counties

Indiana has been bearing the brunt of the drought hitting the Midwest portion of the United States, with reports from a number of counties coming in as to how bad it has gotten.

The Indiana counties surveyed by the MDA EarthSat July Crop Tour were were Putnam, Hendricks, Parke and Vermillion.

After touring fields in each county, it was found that the average was only 56.3 bushels an acre, plummeting from the 143.4 bushels an acre last year the farmers in those counties produced.

According to the USDA, the corn crop in Indiana has only 7 percent of it rated as good to excellent, dropping a percentage point from last week.

To show how bad some of these counties are, Parke County had better looking corn than the rest, and is expected to produce about 121 bushels an acre. That means Putnam, Hendricks and Vermillion counties will, on average, fall another 20 bushels an acre below the 56.3 bushels averaged out for all four counties.

Putnam County may be in the worse shape of all the counties, with the members of the MDA EarthSat July Crop Tour saying most of it will probably go unharvested because of the damage.

All of this is the best case scenario. Who knows where it'll all end if the rains don't come.

Time to Sell Corn?

For those just starting to take a look at corn as a potential investment, it's something that should be held off on, even though Goldman Sachs (NYSE: GS) recently raised their price target on corn to $9 a bushel, and Morgan Stanley to $10 a bushel.

Those price targets were based on nothing more than probable momentum, and most likely the USDA estimates for damage being lower than the reality of the situation on the ground, which is surely far worse than the conservative estimates of the USDA.

Having said that, corn has been rising in price so quickly that it needs to take a breather.

You can tell that from the response of traders to the news that significant rain should hit parts of the Midwest this week. Traders sold off some of their corn, resulting in the price falling by over 5 percent for December corn.

That's important because the damaged corn in the fields are beyond saving, which is up to 50 percent of the corn planted in the region.
In other words, traders were looking for almost any excuse to sell, even though rain will do nothing to boost the quality of the damaged corn, neither save any of it that has already pollinated and is in poor or worse condition.

If someone is interested in trading corn, the best thing to do would be to wait until this selling period ends and then take a close look at the overall picture.

Another element to consider is the threatening drought in parts of Europe and the same in areas of Australia.

For those holding corn, there is a lot of potential upside over the next couple of months, and seeing which usually highly productive areas of corn country are receiving significant rain will tell whether or not corn will continue to surge up in price.

Another factor is how the high price of corn will affect other uses of the grain. It's certain that some of the uses for corn will fall in response to the higher prices, which will do some to pull back on the rise in corn prices.

More devastating weather in the Midwest of the U.S., and other areas of the world, could overcome that response and send corn soaring.

But if the promised rains come and corn that can still be salvaged ends up doing okay, $9 a bushel is probably the tops we'll see.

Probably the only thing that would change that if corn in good condition recovers is if new investors get in bidding up the price without knowing what they're doing.

Rains Too Late for Corn

The announcement that rains will be finally arriving in some areas of the Midwest is a bittersweet forecast if it comes true, as once the corn is pollinated no amount of rain will change the yields of corn.

All that can help corn at this stage is to help the kernels that do grow to expand a little bit larger. It won't produce more kernels on the cob.

The key importance of the rain is for it to hit areas of the Midwest that still have corn that hasn't pollinated and is in decent condition. There is no hope whatsoever for the rest of the corn at all.

Approximately 50 percent of the corn is in poor or worse condition, meaning that it's a total loss.

Most investors are evidently clueless as to this reality, as so far in the trading week they've pushed down the price of December corn by 5 percent, even though the damaged corn will not recover or respond in any way.

Again, all the rains can do is help corn that is still in decent condition and not pollinated. And that assumes this rain will hit the right areas of the region.

Now the response to soybeans was a little more realistic, as they pollinate a little later than corn, so have a better chance of responding in a positive manner to a quality rainfall. Soybeans were down over 4 percent as of Tuesday.

Quality rainfall is rain that is steady throughout a period of time, and not a quick drenching which results in most of the moisture running off instead of settling in to the soil.

Another thing to take into account is the data released by the U.S. Department of Agriculture is far more positive than most of those that know about and cover the grain segment, and so it should be assumed that their numbers are better than the actual results on the ground.

So we can assume more than 50 percent of corn is poor or very poor, and that 26 percent of the corn that is listed as good to excellent by the USDA is probably closer to 20 percent.

Corn just recently broke a record of $8 a bushel, and Goldman Sachs (NYSE: GS) sees it climbing to as high as $9 a bushel.

There is no doubt the USDA will report far worse numbers in the weeks ahead, so traders and investors should be aware of that.

It's very doubtful corn prices will continue to fall in light of the existing corn conditions that are much worse that being reported by the USDA.

Few traders are following the increasing drought conditions in parts of Europe, as well as in Australia.

Most knowledgeable traders see this as a buying opportunity, although they would like to see corn drop about another 20 cents or so before entering back in.

European Corn Now Being Hit by Drought

While the focus on the hot temperatures and drought conditions in the U.S. have been garnering much of the news surrounding corn around the world, parts of southern Europe and stretching through into Ukraine are now starting to get hit by drought-like conditions as well, with temperatures rising to about 5 degrees Fahrenheit above normal, to 95 degrees Fahrenheit.

Accounting for approximately 16 percent of global exports, Europe is now adding to the concerns over how high the price of grains will go this year and how it will affect food prices.

Similar to corn in the U.S., the corn in the European region mentioned has now entered is pollination stage, which is the worst timing because it's that phase of the growth which determines the corn yield.

It is now clear that Europe will now have to import more corn and wheat than normal.

According to the USDA, EU corn yields are projected to drop about 12 percent over last year to about 6.73 tons a hectare, which is a little under two and a half acres.

Countries being hit the hardest in the EU are Italy, Hungary and Romania.

Since the middle of June, corn on the CBOT has soared by 57 percent to $7.9375 a bushel. Goldman Sachs (NYSE: GS) projects prices to climb as high as a record $9 a bushel within 3 months.

Wheat has been rising along with corn, with prices jumping to $9.4725 a bushel.

Soybeans, which are also in danger from under performance, has jumped to $16.4475 a bushel, a 36 percent increase. Along with corn, it has recently set all-time highs.

In early July the International Grains Council estimated the global corn crop to rise to 917 million tons this year, but the ongoing damage to crops around the world wasn't reflected in those numbers, which are sure to drop when the next report is released on July 26.

Kentucky Corn Harbinger for Rest of the Drought Areas?

If the results from recent rains in drought-stricken areas of Kentucky are an example of what to expect from other parts of the Midwest portion of the United States hit by drought, than the outlook for the highly anticipated yields is dismal at best.

Kentucky received above average rain last week, which according to farmers and University of Kentucky agricultural meteorologist Tom Priddy, won't be enough to salvage the corn crop in the state, which was rated at 75 percent poor or very poor as of Monday by the USDA.

So if up to five inches of rain falling on corn in some areas of Kentucky isn't enough, it doesn't give much hope to other regions of the country which are looking to rain to save their crops.

Of course it depends upon the quality of the crop in the particular regions of the Midwest rains could fall upon, but by any measure, no matter what happens going forward, a lot of the U.S. corn crop is lost for the year.

Just recently the U.S. Agriculture Department declared 26 counties in Kentucky as natural disaster areas. The western portion of Kentucky, which is the prime corn farming region, was the hardest hit by the drought, and received only scattered rain during the week.

When a county is declared a natural disaster area, low interest lows are available to farmers eligible for them. Crop insurance will help the farmers hit by the drought, but it won't help in regard to higher food prices, which will without a doubt be passed on to consumers.

The question is generated by the rains in Kentucky of whether or not it's too late for corn that has already been under heavy stress. The answer appears to be yes, and the corn yields estimates in the U.S. undoubtedly will be downwardly revised again.

Corn Futures Rise for Fourth Straight Week

Corn futures in Chicago rose for the fourth week in a row as the drought in the Midwest continues to devastate the corn crop. Weather projections hold out little relief for the key corn production areas of the region.

Corn for December delivery on the Chicago Board of Trade climbed to $7.47 a bushel, up 2 percent, as of 2:00 PM London.

Since the middle of June corn prices have soared 48 percent, and have already jumped 18 percent in July.

According to the National Drought Mitigation Center, parts of the Midwest which stood at 53 percent moderate to extreme drought last week, have grown to 63 percent as of July 10.

As for corn ratings, every day the drought continues, the quality of the corn drops by a little over 1 percent.

This week the U.S. Department of Agriculture slashed its corn yield estimates to 12.97 billion bushels, down significantly from June's estimate of 14.79 bushels. That will be significantly downwardly revised if the weather patterns hold.

Globally, in June the corn yields for 2012 were cut from 949.9 million tons to 905.2 million tons.

Illinois, Indiana Corn Continues to Burn

While the Midwest in general is getting hammered by the drought, which continues to devastate the corn crop, Illinois and Indiana are getting hit the worst of all the corn-producing states, with no relief in sight at this time as far as rain coming any time soon.

A little over 1 percent of the crop rating drops daily for every day it doesn't rain in the region.

The USDA gave a dismal report today where it dropped its corn yield estimates by 20 bushels an acre, down to 146 bushels. That was a much larger downward revisement than anticipated, causing the price of corn to jump over 3 percent in morning trading.

As for the corn supply, the USDA lowered its projections by 698 bushels over June's estimates, falling to 1.2 billion bushels at the end of 2012.

That shows how devastatingly quick the numbers are falling, and each day causes some damage to the corn crop in a way rain won't help it recover.

Top Corn States' Corn Condition Getting Worse

The most recent U.S. Department of Agriculture report says that the top 18 corn producing states in the nation had the quality of the corn drop, as the drought continues to hammer the Midwest.

According to the USDA report, 30 percent of the corn crop in the top corn states is now considered to be in poor or very poor condition. That's an 8 percent drop since just a week ago, when it stood at 22 percent.

Expert have said there is only about a ten day to two week period left where significant rains must come in order to salvage the corn. Already in some areas it's too late for the crop, even if it was to rain hard.

The states being hardest hit at this time are Illinois and Indiana, with Indiana having 61 percent of its crop rated poor or very poor. Last week 50 percent of Indiana corn had the same rating.

Illinois, which is second only to Iowa in corn production, dropped from 33 percent last week to 48 percent this week as to the percentage of the corn crop being rated poor or very poor.

For the entire nation, the amount of corn rated good to excellent fell from 40 percent this week, down from 48 percent last week.

It appears for every day the drought continues, a little more than 1 percent is added to the poor or very poor rating and subtracted from the good to excellent rating.

While the amount of corn planted this year has given some leeway to the industry, a couple of more weeks of this weather will cut deeply into the earlier corn yield projections, which have already fallen quite a bit for the year.

Corn Downwardly Revised 35 Percent from USDA Forecast

The corn yield for 2012 was downwardly revised by 31 analysts surveyed by Bloomberg, dropping 35 percent from the June 12 projection made by the USDA.

If that is close to being accurate, that means that corn stockpiles in the U.S. will stand at close to 1.216 billion bushels (30.89 million metric tons), on September 1, 2013.

Even though the USDA will release its next harvest and inventory estimates on Wednesday, July 11, it's unlikely to confirm or deny these numbers, as they usually change projections incrementally rather than all at one time. There is no doubt though that the numbers will go downward from the last forecast.

Estimates are the USDA could cut corn production estimates by over 8 percent in its next announcement.

As of July 1, the U.S. corn crop was the unhealthiest it has been since the drought of 1988, even though in some regions corn is in better condition than its 1988 counterpart because it was planted earlier this year, which allowed for extended root systems and better ability to access soil moisture.

With soil moisture depleting at rapid rates, those areas will come under extreme stress in the days ahead. Rains in those regions aren't expected to come until about July 17th or 18th at earliest.

At this time less than 50 percent of corn grown in the U.S. is in good or excellent condition. That's also the lowest levels since 1988, and way down from the 77 percent levels as of May 18, according to government data.

Expectations are all of this could result in corn approaching a record $8 a bushel by December.

Many people are missing something in the corn story though, as the record sowing of corn for the 2012 season will probably still result in record yields, with production in the U.S. expected to climb 9.7 percent over 2011 levels.

That will help raise corn inventories from the 16-year low of 837 million bushels as of September 1.

Minnesota Corn Crop Healthy, Ahead of Schedule

While many of the nation's corn states are struggling because of the ongoing drought, northern states like Minnesota are doing very well, with the corn reportedly growing far ahead of the normal schedule for the state.

At this time in the state the corn height is usually about 12 inches tall at best. But on average it's about 23 inches tall at this time, and will be much more by the Fourth of July, where it's usually not even at the 23 inches it now stands. With a couple of weeks left till July 4, it could reach 30 inches, or maybe even a little higher.

Most of this is based upon Minnesota farmers planting their corn seed earlier than in the past, which accounts largely for the increased growth. The weather has cooperated well too, helping to boost growth.

What's even more important is farmers in Minnesota have planted the largest amount of corn in the history of the state, and so the harvest should be bountiful.

At this time it's too early to know whether that's good or bad news, as the drought in other areas of the country are positive for the price of corn, but the weak global economy, along with strong yields in parts of Brazil could end up with a supply glut, which would over the year put downward pressure on the price of corn.

Interestingly, approximately 17 percent of corn farmers in Minnesota are now concerned about there being too much water, as the region has been drenched lately, according to the USDA. Others say the moisture is exactly what they need.

At this time the USDA says that about 82 percent of the corn crop in the state is in good or excellent shape.

Corn Futures Jump on Hot, Dry Weather in U.S.

Soaring temperatures and little rain in the Midwest of the United States has resulted in corn futures climbing to their highest levels in a month, as concerns over whether or not the harvest will be big enough to replenish corn inventories is weighing on the global market.

On Tuesday the corn futures for December jumped 29-1/2 cents to settle at $5.63-1/2 a bushel, a gain of 5.5 percent. It rose as high as $5.64 on the day, the highest level in 3 months.

Corn for December delivery has increased by 11 cents on the week so far.

The major forces driving the prices higher from an investment standpoint has been the commodity funds, which have acquired approximately 40,000 corn contracts over the last couple of days, implying they are bullish on corn at this time.

On Monday the U.S. Department of Agriculture reported the condition of corn was worst than expected, with current weather forecasts suggesting it could get worse. Meteorologists say the bad conditions could last for another couple of weeks in the region.

According to the USDA, 60 percent of the corn crop in the United States is rated from good to excellent condition. That was a drop of three percent from the prior week, and a percentage point less than expected.

With about 5 percent of the corn in the U.S. starting to silk, which means it's entering it's reproductive state, the ongoing poor weather conditions during that stage could have a major effect on yields.

The corn yield in the U.S. for 2012 was estimated to reach 166 bushels an acre by the USDA. Private projections have it at about 160 bushels an acre.