CHICAGO - Ever since the start of the U.S. corn and soybean season, the dryness-plagued Eastern Corn Belt has caused concern for the world's No. 1 and 2 corn and soybean supplier.
Indiana and Ohio are the two key states in the Eastern belt. Together they compose 11 percent and 13 percent of the United States' corn and soybean crops, respectively.
Both states have been suffering from dry conditions since the beginning of planting, which was significantly delayed early on as compared to the rest of the country. Since then, warm and dryweather has been the theme in the east, and many market participants are unsure what to make of the yield potential in these parts.
Ohio has been hit harder than Indiana by unfavorable weather, which is apparent by the government-released crop ratings. Weekly corn conditions show improvement in Indiana but considerable slippage in Ohio, where the percentage of corn in good or excellent condition has fallen by 16 points over the past month.
Crop analysts from Thomson Reuters traveled through the heaviest production districts in Ohio and Indiana during the first three days of August to both observe the field conditions and pull corn ears at random to assess yield potential. Soybeans were strictly examined at the qualitative level since they are not far enough along to count pods.
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These direct observations suggest that corn and soybeans in some of the hardest hit areas still have the capability to squeak out a respectable crop, though the final outcome is going to rely heavily on the weather over the next several weeks.
CORN HANGING ON
Early August is typically a good time to observe fully elongated corn ears in Midwestern U.S. fields, but because of the delayed planting, many ears were still in very early stages in parts of Ohio and Indiana. ( http://tmsnrt.rs/2aL6WeQ )
This makes it harder to estimate the true yield potential of some fields since it is uncertain how large the ears will become, and whether all of the formed kernels will eventually fill with grain. But this is not necessarily bad either because it does not offer confirmation of damage, meaning that it may not be as bad as feared.
Corn ears in the more advanced stages were generally satisfactory, though signs of the challenging weather were apparent. The ears were not terribly stunted, though some of the kernels had failed to pollinate both at the tip of the ear and scattered throughout. ( http://tmsnrt.rs/2ao4UEV )
It was common for at least one of the five randomly selected ears to be significantly stunted or missing quite a few more kernels than the others, and this was more prominent in Ohio than Indiana.
Regardless of ear stage it was clear that most of the fields needed rain, some badly, particularly Ohio and eastern Indiana. Once inside these fields, the topsoil was very crumbly and cracked, and some of the base leaves of the plants were beginning to brown. ( http://tmsnrt.rs/2aL9ude )
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Despite how dry it is, only very few locations in Ohio were visibly stressed from the road. This is very important because it is not obvious by simply driving by just how much in need of rain many areas throughout both states are.
Rain necessity is further elevated by the early stages of development. For the most part, corn in Ohio and Indiana has between one and two months to go before the ears fully mature with hardened grain, so even corn that looks great as of today is still at risk going forward.
And rain is only part of it. Temperatures are very deterministic of just how much grain fills within each kernel. Yield prospects are higher when nighttime temperatures cool off sufficiently for corn plants to optimize the respiration cycle.
If the weather is generally cooperative over the next month or so, Indiana's corn yield could be quite high though likely short of record. The Hoosier state has some moisture to work with if theweather does become more strenuous, and a lot of the corn is already in decent enough shape such that bad weather should not significantly weigh down national yield ( http://reut.rs/2ao32w5 ).
Favorable weather going forward for Ohio could place corn yield in the vicinity of last year's result, which was also tarnished by dryness, and well below record. But even the worst weatherforecast should prevent complete disaster in the Buckeye state.
SOYBEANS ARE THIRSTY
At this point in the season, soybeans are still flowering and producing the pods in which the beans will ultimately form. The weather is absolutely critical during this process because it determines how many pods there will be and how large they will be.
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Counting pods at this early stage would be futile since the number is subject to change, but it is not too early to see that soybeans in the Eastern belt will need a couple more soakings to achieve a solid yield.
Ohio soybeans were in much tougher shape than those in Indiana. Signposts of stress were very apparent on these soybeans, including many aborted flowers (meaning that pods will not form) and exposed leaves turned inward away from the sun even early in the day. ( http://tmsnrt.rs/2aocdwu )
Plants with aborted flowers still have the chance to produce new flowers, but it would be difficult to do without sufficient moisture. And once the pods are formed, the weather is instrumental in determining the size of the bean within.
But soybeans could be in luck because unlike corn, soybeans can often make do with just one or two good rainfalls in August, even if the temperatures are warmer.
WEATHER IS EVERYTHING
As of midday Friday, weather models are placing increased rainfall chances within the next two weeks in both Ohio and Indiana. ( http://tmsnrt.rs/2aog9x6 )
Extremely hot temperatures are not expected over this time frame, but warmer-than-normal temperatures will generally be the norm across both states. ( http://tmsnrt.rs/2aLrVyl )
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This forecast certainly favors soybeans in the Eastern belt more than corn. At this point, soybeans will suffer much more from lack of rainfall than warmer temperatures, so the potential for more substantial rainfall into the second week of the month could be greatly beneficial if realized.
Corn will be a bit trickier because the minimum temperatures may not be convincingly low enough to maximize grain fill, and corn in both states could use some moisture sooner rather than later.
The most recent longer-term forecasts issued by the U.S. Climate Prediction Center suggest neither a favorable nor unfavorable weather bias for the Eastern Corn Belt through at least the next month. This most likely creates even more uncertainty for the market over corn and soybean yields in both Indiana and Ohio, which is par for the course in the late-summerweather markets.
