3rd Worst Soybean Yield Signals Price Susceptible To Further Spikes

Tyler Durden's picture

Recent consolidation in Soybean prices may be susceptible to notably higher prices since JPMorgan's new Soybean Crop Condition Index suggests the crop is in much worse condition than average conditions since 1986. They see the 2012 crop faring slightly better than the 1988 crop (thanks to seed technology) but suggest this could be the third-worst crop since 1964 in terms of actual yields relative to trend. Critically, if long-term drier- and hotter-than-average weather occurs (which appears likely from forecasts with soil moisture levels so low as to make even marginal rain practically useless), there is considerable downside risk to the soybean yield forecast (and implicitly upside risk to prices).

Soybean price consolidation...

JPMorgan Soybean Conditions

We introduce our US soybean crop condition index (CCI): We calculate this indicator using the same methodology as our corn CCI using weekly data from the USDA’s crop condition ratings (summing 2*proportion of crop rated excellent, 1*proportion of crop rated good, ?1*proportion of crop rated poor and ?2*proportion of crop rated very poor).


This week’s soybean CCI indicator suggests that the crop is currently in much worse condition than average conditions since 1986. However, we think the 2012 US soybean crop will fare slightly better than the 1988 crop as seed technology has made the crop more resistant to drought and there is potential for improved weather through the end of August. Our yield forecasts suggest that this could be the third-worst crop since 1964 in terms of actual yields relative to trend (Exhibit 2). Keep in mind that soybeans are more resistant to harsh weather than corn—even in 1988, US average corn yields declined by 24% relative to trend, while soybean yields only declined by 17% relative to trend.

Light rain in the forecast for the US Midwest is unlikely enough to reduce soil moisture stress: During this week, some precipitation affected the northern and eastern part of the Corn Belt but temperatures remained about 1°-to-5°C (2-to-9°F) above average. Current weather forecasts suggest that light rain will continue through the next 1-to-2 weeks; however hotter conditions will also persist. Longer-term forecasts suggest that weather for the balance of August will generally feature above-average temperatures and average to below-normal precip in a large portion of the Midwest. In a normal year this forecast would not be particularly detrimental for US soybeans, but because the soil moisture is so low, rounds of light rain will not be helpful for yields. We took short term weather forecasts into account in our latest 2012 US soybean yield estimates. If long term drier- and hotter-than-average weather occurs, there is downside risk to our 2012 US average soybean yield forecast.

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vinu02's picture

Everything is spiking up this days, except fear index and economy.


francis_sawyer's picture

Soybeans in the Mid-Atlantic regions have been BETTER than usual...

Quantify bitchez...

francis_sawyer's picture

Sorry 2 do this 2 ya malikai...

But soybeans grow in the dirt (not on charts)... As stated above ~ perhaps the aggregate numbers don't jive with what I'm saying, but around here, it's the best soybean crop that I've just about ever seen...


malikai's picture

I thought they came from the dirt. I wasn't sure though. Glad to hear I was right all along.

However, if you want to quantify something, it will probably end up in a chart at some point.

Aziz's picture

Anyone else think the Monsantoization of the food supply is dangerous? With yields dependent on the success of one or two monocultural varieties which may fail en mass under certain conditions (lab testing is nothing like something working in the field)...?

francis_sawyer's picture

That's why you do whatever is in your power to 'heirloom' what you can (on whatever scale)...

EVERYONE CAN DO THIS... So as much as I'm entertained by 'gold, guns, ammo & silver bitchez'... as well as 'FUCK BERNANKE' shout outs... This is not something outside of your power to accomplish...

taraxias's picture

Go count them and give us a report if charts don't mean anything.

There's nothing more dangerous than a sample of one.

Other than that, you are just an annoying troll, nothing more, nothing less.

francis_sawyer's picture

OK then... You win...

SOYBEANS ARE DEVASTATED WORLDWIDE BITCHEZ!... Run for your lives!... You have no chance of seeing the light of another day!...



How about a report from your region? (under the interstate bridge ~ as the case may be)... & for that matter... BLOW ME... My comment was a +1 to Aziz (who has made the only coherent comment thus far speaking out against GMO seeds [which I support & suggest everyone do what's in their power to prevent by growing & saving their own heirlooms UNTIL YOU FUCKING HIJACKED THE THOUGHT STREAM])...

Happy McDonalds, Taco Bell, & Soylent Green to you... Hopefully for you, they'll provide all the dental benefits your beloved government promises...

European American's picture

89% of all Soy grown in America is GENETICALLY MODIFIED. 


61% of all Corn grown in America is GENETICALLY MODIFIED,


Hmm, maybe Nature is taking care of business on Her own? A little drought here. A little flood there. One way or another, she'll shake off the "invasive species".

Prometheus418's picture

I'll bite, even though I'm not tarax.

Corn and soy are ok here (Wisconsin), but starting about 50 miles south of me, everything is brown and dead.  It's been creeping further and further north as the summer moves on, too.

But FWIW, everyone in my neighborhood has gardens- I've got a limited number of heirlooms, but a ton of Burpee's "Big Boy" tomatoes.  They're a hybrid, with the increased yeild and disease resistance, but they've been around forever and are a simple cross-breed.  The seeds aren't sterile, and will regrow one of the varieties used in the cross.

Only downside to heirlooms is the lower yeild- it might not matter if you have plenty of room, but when space is at a premium, the hybrids help a lot. 

francis_sawyer's picture

Hardly matters... (it's worthwhile)

Seed cultivation is highly prolific... For years now... some stuff I grow is just for seeds...

Very good chance a Monsanto engineered product never comes near me... The farther away the better...

Oliver Klozoff's picture

Same thing here in N. Lower Penninsua of Michigan. Corn is doing great, soybeans on the small side but still growing.

Over a couple counties, the Thumb is bad, the SW Lower really bad.

A few lucky farmers will have a windfall year, unless they get corzined.

Landrew's picture

To bad most of the soy/corn production isn't in the Mid Atlantic! Here in IL. the crops are failing. It's so dry here a windstorm blew trees down pulling them out by the roots. 24" trees snaped in half they were so dry. The corn is weak and dying already. The pine trees are dying by the thousands.

otto skorzeny's picture

the only beans in IL doing well are in Will and Kankakee counties(2 out of 105)-the rest are terrible. but then again most farmers are planting corn year after year because they know that ethanol will suck up any extra crops. so much for "crop rotation"

francis_sawyer's picture


Now there's some info that makes sense (or helps)...

I'm sorry for all the harsh words here & about, but I can't stand bullshit that doesn't help people in the end...

The article (on par)... Helps nobody (JPM??? ~ YGFBKM)... My comments, thus far, have been twofold...

1. asking for some quantification

2. Giving a 'boots on the ground' status report from my region (which has been expanded, square acreage wise, by LOP above/WAIT ~ below)...


I'm thinking that the uptake, THUS FAR, is to be irritated by the ethanol prop (which I was always against), which, as nature will rub your nose in, can & will always tell you that you're FOS...


So therefore when I hear about SOYBEAN shortages in drought striken areas which were unnaturally acreaged for CORN... I fucking blow a fuse... But that's just between me & Al Gore I suppose...

Ignorance is bliss's picture

The mid-Atlantic doesn't produce a lot of soybeans relative to the mid west. Iowa and Illinois produce over 30% of the U.S. yield. How are those states? By the way if your comments continue to be uninformed. Perhaps you should shut the fuck up and stay away from your keyboard. Hmmm...?



francis_sawyer's picture

I'm just sayin'...

Wanna believe your charts? Or my lyin eyes?... I'm not aggregating here... Just telling you what I'm seeing (over an extraordinary number of acres of farmland)...

Fuck me if I'm wrong...

percolator's picture

You should short beans then if you really think your eyes are seeing such a great crop.  Though before you do you might want to take a drive through the midwest which is where the crop matters cuz in the grand scheme of things the mid-atlantic region's "extraordinary number of acres" are practically meaningless.

In 2010 over 80% of soybeans are grown in the following 13 states and not one of them is in the mid-atlantic region:

2010 Top Producing States in U.S.   Corn Soybean   State Acreage % Total State Acreage % Total 1 Iowa 13,500,000 15.2 Iowa 9,900,000 12.6 2 Illinois 12,600,000 14.1 Illinois 9,500,000 12.1 3 Nebraska 9,200,000 10.3 Minnesota 7,200,000 9.2 4 Minnesota 7,600,000 8.5 Indiana 5,500,000 7.0 5 Indiana 5,700,000 6.4 Missouri 5,400,000 6.9 6 S. Dakota 5,000,000 5.6 Nebraska 4,900,000 6.2 7 Kansas 4,700,000 5.2 Ohio 4,600,000 5.8 8 Wisconsin 3,900,000 4.3 S. Dakota 4,400,000 5.6 9 Ohio 3,700,000 4.1 Kansas 4,100,000 5.2 10 Missouri 3,300,000 3.7 N. Dakota 4,000,000 5.1 11 Michigan 2,400,000 2.7 Arkansas 3,300,000 4.2 12 Texas 2,200,000 2.4 Mississippi 2,160,000 2.7 13 N. Dakota 2,100,000 2.3 Michigan 2,050,000 2.6



francis_sawyer's picture

I'm not a soft commodity trader... That's a job for dumbasses...

In fact... Wanna know the first thing I thot of when it was rumored that the corn crop was coming in light?... I went out & stocked up at the supermarket on pork & beef products for the freezer... Yeah ~ that's right... They drop like a rock when it's expected that the cost of feed crops is going to go up (because they have to cull herds)...

But you wouldn't know that now would you because you're just a chart reading stupid ass fucking facist coffee machine looking motherfucker...

Who the goddamn fuck is trying to be the Hilary Clinton of fucking SOYBEANS on this goddamn blog anyway?... & even if they were ~ they'd need a lot more than parking garage manila envelopes from Clarence Beeks to make that happen...

Have a nice Starbucks double mocha-locha fucking frappucino... (on me)...



percolator's picture

No, I'm a farmer and you've proven to everyone here you're the fucking dumbass.  And the best you can do is resort to childish ad hominem attacks.





otto skorzeny's picture

francis_sawyer-D-Bag of the Day!

francis_sawyer's picture

Alright ~ I'll bite... [Both of you}

QUANTIFY how devastating this is all going to be for us all [I expect a text wall here]... I'll drum my fingers here while you're puttin the tractors in the barn...

Landrew's picture

Sadly you are very wrong. The Mid-West grows the most soy in the world! 

LawsofPhysics's picture

Ours are in the Carolinas and Georgia.

Lednbrass's picture

Actually the mid atlantic and both states you mention havent had it all that bad this year and none are in the big USDA officially designated drought areas. The southern tip of Illinois is but it appears that so far most of the state escaped the worst of it.

dbomb12's picture

Nobody wants GMO soybeans!!! beat the market buy local and often before the Feds shut it down

otto skorzeny's picture

actually-ALL of IL except fo Chi and collar counties are in a state of high drought

francis_sawyer's picture

true... & I feel bad... but... PERSPECTIVE...

The Charlotte Bobcats (Michael Jordan's team) had, by far, the worst record in the NBA last season...

Never again will HOOPS 'ever' be played in the state of North Carolina!

Prometheus418's picture

Last I heard, 43 WI counties have declared drought emergencies- and that's North of IL.  The dividing line between ruined crops and mediocre ones is right around Osseo.

Turd Ferguson's picture

fwiw...A logical entry point on the Nov bean would be around $15, which would be near a 50% retrace of the move from 12.60 to 16.90

francis_sawyer's picture

Thanks Turd...

This is my exact point... This whole thread is a non-starter (except for the entertainment value involved in sponging out worthless doomsday hyperbole)...

Half these MF'ers wouldn't know a soybean from a blood engorged fucking dog tick if it was sitting on their plate at dinner...

Prometheus418's picture

I see your point, and I'm not a farmer, but I drive through 50+ miles of farmland every weekday to get to work, and have done the same for years.  I know what decent corn, soy and sorghum look like, and this year they look decidedly rough.

Not dead- but sickly looking and brown.  In my own garden, we're getting produce, but no where near the normal amount, even though I'm spending a fortune on water to keep it alive. 

francis_sawyer's picture


Not to get in your grill about it (do what you want)...

But you ought to research h2O conservation & storage techniques... I'm talking about the divide between (for kicks) 2 acres and less. vs. more... IOW ~ anyone with 2 acres or less (when it comes to irrigation for their own produce), should be able to make do if they have the right set up (unless they're either QUITE SEVERELY drought stricken, or unlucky)...

Egads man... It's the 21st century...

-1Delta's picture

corn is not much better shape IMO


Yield dev of 30% with a mandate... easilly lowest new crop stocks/use on record (at least for the month of AUG).

USDA must come out and either put ethanol below the manadate (while zero economic incentive at the current moment), or come out with a 1% stocks/use (which we know the market does not even withstand).

amazing how bear spreads trying to work and IV crush trying to occur ahead of Friday




magpie's picture

If the mandate is revoked, it's effectively an additional long oil trade.

-1Delta's picture

not really IMO. mandate or no mandate.. ethanol at 110 octane is the cheapest substitute for octane.

Ergo.. still all about refiner margins (and plant margins first to cut storage)... washington/ politics totally irrelevent IMO.


It is synteticall a long gasoline trade as RIN credits must offset refiner negative margins. So mandate or no mandate if there is not enough supply.. RINs force ethanol to trade with RBOB.... and that may trickle down to corn, but RBOB/Ethanol  visavis Rins is the play, not WTI oil/CORN IMO

LawsofPhysics's picture

Good news.  We will have a good soybean harvest this year baring a suprise "soybean tax" of course.

Lednbrass's picture

I wouldn't give them any ideas if I were you- after all you didn't grow that and why should you prosper while some other farmer getting hit hard by lack of rain and/or irrigation has a very low yield? Crop yield disparity must be corrected!

Agent P's picture

The only farmers getting hit hard are the ones lacking crop insurance.

buzzsaw99's picture

the "farmers" getting subsidies to NOT grow shit make out like bandits no matter what the weather.

uraniuman's picture

Try to keep up - After october there are no direct payment to farmers - and there have NOT been payments to not grow shit for many years

Lednbrass's picture

True to a point- but there are variations in crop insurance and also the levels of coverage. To assume that because someone has some kind of crop insurance they will be OK is not correct, it is a fairly complex product with alot of variability in coverage, cost, and method of calculating payout.

Gold plated crop insurance (like gold plated insurance of any kind) has a high price tag which is not necessarily affordable, particularly for small and mid sized operations and even then it very likely won't replace the lost income of a year with good yield. It will keep a large well funded operation from moving backwards but it may or may not allow a smaller operation already on the edge to survive.

LawsofPhysics's picture

You are correct.  Moreover, will that "payout" actually feed anyone?  Oh wait, can we eat i-thingies now?


Insurance, yeah, how many of those failed business models has the taxpayer bailed out?

Lednbrass's picture

Yeah, but you can't tell this stuff to somebody who mostly only sees food growing on TV and reads "news" stories. I only grow a little bit for local farmers markets and side money so I don't use insurance but the guys I know who do volume have a whole different set of problems this year.

The other folks will figure out the reality on the grocery shelves late this year and definitely next year. 2013 is going to be good for the beef and pork guys who make it through.

francis_sawyer's picture

 "2013 is going to be good for the beef and pork guys who make it through."


That's the money shot there... IOW ~ fill up your freezers with pork & beef while they're on sale now... Use the savings to buy your wife a new pair of shoes & everyone goes home happy...

Agent P's picture

Crop insurance isn't designed to make a farmer rich, it's designed to protect them from loss.  Provided they hold a MPCI policy, they will be okay.  Those who rolled the dice and went naked or just bought hail protection this year could easily go under.  I live in the heart of Illinois corn country and have friends and clients who are farmers, and this is what I'm hearing. 

Prometheus418's picture

That's easy enough to say, and I'm sure there's truth to it.  

Problem is, we had a wonderful spring- it warmed up early and stayed that way.  I forget the exact percentage, but many farmers in the affected areas put their crops in early and invalidated their own insurance.

Yes, that is their own fault- but it won't make it any easier on the rest of us when they can't plant next year.

Lednbrass's picture

I am as cynical a SOB as anyone here- but down arrowing a man who grows millions of pounds of soybean a year because he is having a good season?

That is some fucked up shit right there. What do you people who have likely never gotten dirt under your nails since you were a kid want- should he send his beans to someone who isn't having a good year to redistribute the yield?