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CME: Corn and Soybean Quality Rating Decrease

05 September 2013

US - Tuesday’s holiday-delayed Crop Progress report from USDA came in just about as expected with both corn and soybeans losing ground for the week.

The percentage of the corn crop rated in good or excellent condition fell 3% to 56 while the same rating categories for soybeans lost 4% to 54. Both figures are the lowest for the year so far. The corn rating is right on the 10-year average for the beginning of September while the soybean good/excellent total is 4.4% lower than the long-term average. Both figures are remain far ahead of last year’s drought-driven debacle. One year ago this week, 52% of corn acres and 37% of soybean acres were rated as either poor or very poor.

Both crops have, quite normally, “caught up” on the progress and development ratings used in the past. Such is inevitable as beans eventually have to all be filling pods regardless of how well they are filling pods and corn eventually has to go through dough and dent stages regardless how many kernels may be present or how large they might be. That this year’s numbers are near last year or the 5– or 10-year average for these various stages is now pretty immaterial.

What matters is the comparisons for the ongoing or newest development stage for this year. The next important one for soybeans is dropping leaves and USDA has not begun to publish those data for this year’s crop. This is the first time since 1985 that dropping leaves data has not been published for this week, week 35, on USDA’s calendar. By this week last year, 19% of soybeans were dropping leaves.

Just 4% of corn is rated mature. This is the first week for that progress step in this year’s Crop Progress reports. It’s not the latest that USDA has begun reporting maturity in the crop progress reports but they have started only one week later in only five previous years, the most recent of which was 1996. One year ago, 41% of the crop was rated as mature and week 35 (this week) marked the fifth week that USDA had reported mature corn percentages.

BOTTOM LINE — these crops are VERY IMMATURE as of September 1. That, of course, brings frost into play but NOAA’s 8-14 day temperature outlook (page 2) says the probabilities are high for normal temperatures from the Missouri River eastward and abovenormal temps for the far western part of the Cornbelt. Note that this map covers September 11 through 17.

Futures markets have reacted negatively to the report with new crop corn contracts losing about 4 cents on today’s trading which began yesterday evening. New crop November soybeans are down roughly 12 cents as of this morning while December soybean meal is $6/ton lower.

The Smithfield Foods-Shuanghui International deal has been “off the radar” in recent weeks but yesterday’s announcement that Smithfield stockholder Starboard Value LP would oppose the deal will likely reverse that for a few days. Starboard had announced back in June that it believed the deal was underpriced at the agreed-upon $34 per share. That price put Smithfield’s value at roughly $7.1 billion but Starboard claims that the company would be worth $9 to $10.8 billion if sold in pieces. Starboard has proposed three pieces — hog production, pork production and fresh/packaged meat sales. News reports indicate that Starboard CEO Jeffrey Smith has told Smithfiled that it (Starboard) has received non-binding written indication of interest from third parties for each of Smithfield’s assets and that the aggregate value is “substantially in excess of the $34 [per share] cash deal with Shuanghui.” Key dates in the saga are September 24 when a special shareholder meeting will be held to vote on the Shuanghui transaction, and November 29 when the deal is set to close.

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