Fundamentally Speaking

Soybean Crop Conditions vs. Final Yields

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst

Similar to what we did with corn, this graphic shows the correlation coefficient between U.S. soybean crop conditions by week and the percent that the final yield deviates from the 1986-2014 trend.

To calculate crop conditions we incorporate our usual ratings system where we weight the crop based on the percent in each category and assign that category a factor of 2 for very poor, 4 for poor, 6 for fair, 8 for good, and 10 for excellent and then sum the results.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

The starting point is week 23 of the year which is usually the second week of June and goes through week 41 which is the second week of October.

Note how the correlation increases as the season goes on with the highest correlation to the deviation from trend yields seen in week 37 that is usually the middle of September when the crop is usually filing the bans inside the pods.

We note that the highest coefficient is for week 41 but the crop has already been made at that point with harvest by that point in the season often close to complete.

Furthermore, since 1986 there have been only ten condition reports issued that late in the season vs. 29 week 37 observations.

(KA)

P[] D[728x170] M[320x75] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]

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Freeport IL
6/1/2015 | 8:01 AM CDT
The soybean market seems strong compared to the "lead balloon" formations of corn and wheat. The rains of the past week or two seem to of added yield to the wheat complex. The added yield comes with increased quality concerns. This opens the door for wheat to find its way into the feed channels. This might mean 100 million or more bushels of corn displaced by feed wheat. These two factors may have resulted in weakness of corn and wheat prices. ("Big" wheat quality discounts may also be forth coming.) The relative strength of soybean prices appears to be held above a deep canyon of lower prices by four vines. Those vines appear to be: chance of low South American production, chance of low US production, South American policies and China demand. The realization that any one of these factors has changed could cause soybean prices to "lead balloon" into the canyon of lower prices. But an increasing concern of any one factor could cause a vine to grow strong enough to continue to hold prices. We may have a long way to go to see how these factors play out. The South American production is not even out of the bag. For that matter it may not even be in the bag. Brazil will start planting USDA's 2015-16 marketing year crop (the crop we are or have planted this spring) on September 15, 2015 (this coming fall). New crop prices may be holding high to make sure the projected level of planting occurs. August is the month, it is said, that makes US soybean yield. So parts of these two factors will be unknown till late summer at the earliest. Changes in the other two factors could occur at any time. The South American political risk seems to be associated with their export taxes. A drop of these taxes might result in a release of soybeans stored by farmer as inflation and/or currency hedge assuming their currency/inflation situation stabilizes or improves. China is the largest importer of soybeans. Their continued demand is expected and need, for stable to increasing prices. The potential "lead balloon" of soybean prices appears to be held at these "higher" prices by the four "vines". The strength or weakness of two of the major supports will be partly unknown until late summer at the earliest. Baring policy changes in South America and/or China, soybean may appear "strong" (relative to corn and wheat) till then. Freeport, IL