Soybean crop conditions improve in the US

The United States Department of Agriculture's (USDA) weekly update on the condition of North American soybean and corn crops indicated an improvement in the condition of the oilseed and a worsening in the condition of the cereal in the week between July 22 and 27.

“Despite the worsening corn conditions, good or excellent conditions remain the best since the 2016/17 season, indicating excellent development so far,” said Luiz Roque, Market Intelligence Coordinator at Hedgepoint Global Markets.

Soybean

Regarding soybeans, according to the USDA, as of July 27, 70% of crops were in good or excellent condition, an improvement of 2 percentage points compared to the previous week (68%). Crops remain in a better situation than in the same period last year, when the percentage of crops in good or excellent condition was 67%.

Corn

Regarding corn, according to the USDA, as of July 27, 73% of crops were in good or excellent condition, a 1 percentage point decline compared to the previous week (74%). "Despite the deterioration, current rates remain well above those recorded in the same period last year (68%). Furthermore, the current percentage remains the best since the 2016/17 season," notes the analyst.

“When we look at the Normalized Difference Vegetation Index (NDVI) for the American Midwest, we see that current levels indicate excellent plant density compared to the previous harvest and the average over the last 25 years, also indicating good crop development to date,” he says.

Weather forecast for the next two weeks

According to analyses by Hedgepoint, climate forecast maps now point to a period of some moisture over much of the growing belt between July 28 and August 3. Despite this, parts of some important producing states are expected to receive little or no moisture during this period, which could create a less favorable environment for plant growth.

Between August 4th and 10th, humidity should continue to reach most of the producing belt, but with little rain expected in the Dakotas and south of the belt.

"It's important to remember that August is a crucial month for the development of the soybean crop in the United States, and consistent moisture is necessary for good grain-filling progress. We need to be extra vigilant in the coming weeks, and we may see increased volatility in Chicago," Roque emphasizes.

According to the coordinator, the rainfall forecast for the entire month of August points to rainfall close to normal across practically the entire producing belt, with no signs of "pockets of drought" in any major producing state.

Regarding the temperature forecast, the map for August also indicates temperatures within normal limits in most of the production belt, which tends to be favorable for crops.

“In general, weather conditions continue to point to favorable weather in the North American production belt in the coming weeks, with no major apparent risks to the final development of the soybean and corn crops,” he says.

Position of Speculator Funds

Faced with a positive climate and possible full harvests in the US, hedge funds continue to hold net short positions in soybeans and corn.

Roque explains that in soybeans, between July 16 and 22, the funds even reduced their short positions by around 22 thousand contracts, but continue with a net short position of approximately 67 thousand contracts, which indicates some weakness for Chicago.

"In the case of corn, funds continue to bet on the sell side of the market, maintaining their net short positions since mid-April. Even with a reduction of approximately 1,5 contracts between July 16th and 22nd, the net short position remains around 264 contracts, close to the low of the last five years (which also indicates weakness for Chicago)," he concludes.