This past month of the U.S. growing season has been probably the most diverse in memory, with heavy rains flooding fields in the northern Midwest and extreme heat and dryness hitting soybean fields from central IL to the U.S. Gulf Coast. Because of these extremes, the USDA's next soybean crop update on September 12 will be highly anticipated and could be influential on the coming year's agricultural prices.  

Because of dryness in eastern and the northwestern areas of the Midwest during July, crop scouts on last month's Midwest crop tour reported this year's average pod counts were lower than year-ago levels in five of the seven states they visited. This suggests reduced potential vs. the 2006 national yield of 42.7. However, the 200% to 500% higher-than-normal rainfall in portions of the major Midwest producing states likely will boost average yields by 1 bu. in the ECB and 0.8 bu. in the WCB while yields in the Delta could slip by 1.3 bu. The past month's weather has also likely reduced 2007 harvested acres by 500,000, because of flooding and increased disease outbreaks in the northern Midwest, as well as parched soils in southern Midwest and Delta might have damaged this year's expanded double-crop seedings in these areas. Overall, September's U.S. bean output estimate might rise, but its increase could be a modest 20 million bu. to 2.645 billion with a U.S. yield of 42.1 bu. per acre.

Strong late-season crush and export shipments could boost both these demand levels by 5 million bu. and 10 million bu. respectively on the USDA's next supply/demand update, dropping old-crop stocks to 560 million bu. ahead of the September 30 stocks report.

Overall, this year's smaller U.S. crop has tightened world supplies sharply (-13 mmt to 51.6 mmt). And the current 4%-6% higher South American planting increase is not likely to make up any more than 3-5 mmt, if yields swing back to trend after 2007's dramatic 360,000 tons per hectare gain to a record 2.88 mmt. Early season harvest activity could drop prices to the $8.25-$8.40 area, but producers should hold sales at 35%-40%--given the world's declining stocks and the need for higher 2008 U.S. seedings likely to boost prices later this fall.