Southwest Iowa Crop Conditions

Looking back at the August crop report from USDA and Iowa Ag Statistics, Iowa’s corn yield was forecast to be 2020 bushels per acre with total production over2.7 billion bushels. Soybeans at 58 bushels per acre with over 540.5 million bushels total
2/3production. USDA forecast average prices for the upcoming year of $3.10 corn and $8.35beans.

Fast forward to the January 2021 report, which is considered to be the “final” crop production report for the year. Iowa’s corn crop declined to 178 bushels per acre with less than 2.3 billion bushels. Soybeans declined to 53 bushels per acre with under 494 million bushels.

What happened to the bin-busting crop that we figured on for 2/3 of the growing season? A somewhat new term called “flash drought” occurred, beginning in west-central Iowa from Fort Dodge extending southwest into the southwestern corn of the state. This area began to show itself in mid-May and normally would be of little concern at the time. It showed no intensification until mid-July, and really intensified and began spreading by August 1. On August 10, the derecho wind storm decimated a swath across the mid-section of Iowa beginning east of Highway 71.

Bottom line is that great crop potential dwindled rather quickly in late summer. Soybeans were far ahead of normal development and had great pod development already by August1. That’s why we were able to hang on to 50+ bushel yields. A normal August that would have focused on pod-development could have taken another 10 bushels per acre off the bean yields.

The result has been a 5-month sustained uptrend in corn and soybean prices. While crops were shorter than expected, the long-term draw-down of global supplied coupled with drastically improved demand from China has pulled prices steadily higher. I have not seen a similar up trending market in my 45 years of grain marketing experience. Normally,prices jump higher or free fall lower in response to “new” news affecting the market. Not the case here. It’s been nearly trend line higher for both corn and soybeans.

Leading indicators? One that’s pretty consistent is the weekly Commitment of Traders Report. Normally, when managed money (speculators) goes long by more than 200,000net contracts, it signals a topping market. Not the case this year, as net longs have held near record levels for quite some time. Obviously, they hold contracts believing prices will continue to improve.

An old saying goes that “markets move higher when the crop has left the farmers hands”. That means the market has to bid up for remaining bushels as holders get very bullish and proud of their inventory. After 6-7 years of range-bound prices, $4 corn and $10 beans brought a lot of bushels. A recent informal survey by a local grain buyer found that 80-85% of local bushels were already sold. The glory of $5 corn and $13 beans will affect only a minority of bushels.

New-crop prices of $4+ corn and nearly $11 beans will be very profitable if we catch rains to produce a reasonable crop.