Fundamentally Speaking

Since the August 10th crop production report, soybeans and soybean meal have posted large declines on the bearishness of the USDA figures, heavy fund selling and sentiment that weather the second half of the growing season is turning out to be more favorable than seen in June and July.

As discussed in prior posts, soybeans are seeded after corn so their critical developmental period also occurs later in the growing season, so weather the second half of the summer is very instrumental in determining final soybean yields.

For that reason, we do not have as many disputes with the individual USDA state yield projections as we did with corn.

In this graphic we show the percent change made in soybean yields from the initial 2017 estimate given earlier this month compared to the final 2016 yields and that is contrasted with the change in the individual state crop conditions for the middle of August for both this year and last.

Crop conditions are measured using 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.

We note that the percent drop in projected yields for the "I" states (Iowa, Illinois and Indiana) are much less than the percent deterioration in weekly crop ratings from 2016 to 2017.

On the other hand, there are states like Kansas, Minnesota and Ohio where the initial USDA soybean yield projection appears too low.

In general, it seems like the trade is more convinced that the USDA's 49.4 bpa U.S. soybean projection is more attainable than their corn estimate of 169.5 bpa even though the latest crop condition reports peg the combined good and excellent crop ratings at 60% vs. the combined 62% figure for corn.

(KA)