A further decline in the condition of US crops, notably in Illinois, the second-ranked producing state of corn and soybeans, has raised fears of further downgrades to official yield estimates.
"Condition ratings in key Corn Belt state Illinois continue to plummet," Paul Deane at Australia & New Zealand Bank said, after the US Department of Agriculture showed a lack of moisture continuing to damage crops.
"Many farmers [reported] that the dry weather is taking a toll on crop conditions," the USDA said.
For soybeans, the proportion rated "good" or "excellent" tumbled by four points to 53%. For corn, the percentage plunged by eight points to 42% – down from 64% a year ago.
‘Downgrade looks likely’
The decline put cuts to USDA yield estimates for Illinois on the agenda, ANZ said.
USDA officials have already cut their forecast for the state’s corn yield to 170 bushels per acre, from the 175.8 bushels per acre indicated by 20-year trend analysis.
"If conditions continue to deteriorate, look for further downward adjustments," Mr Deane said.
For soybeans, currently rated at a trend yield of 48 bushels per acre, "a downward revision… looks likely, particularly if adequate moisture is not received in the next few weeks".
Commerzbank analysts – saying that an improvement in crops in many drought-affected states such as Illinois, Missouri and Texas, "is unlikely in the near term" – warned that the USDA estimate of a national corn yield of 153.0 bushels per acre was at risk.
"Further downgrades could be made in the coming weeks," the bank said.
"The USDA crop forecast should therefore still prove too optimistic, despite the downward revision already made in August," from 158.7 bushels per hectare.
For soybeans too, another downgrade to the US yield estimate "cannot be ruled out given the persisting drought"
‘Rain needed – now’
In fact, US soybean crops are seen as having some potential for recovery if rains are forthcoming, with Mike Mawdsley at broker Market 1 saying that soybeans "can still be helped greatly with timely rain to help fill pods".
"But time will quickly close on them as well if the start turning colour and the plant starts to shut down. Rain is needed – now."
For corn, damage is less reversible. "Corn is dead on some of the sandiest ground and looks more like the middle of October than mid August. The corn crop is pretty much a done deal," Mr Mawdsle said.
‘Remarkably like 2006 and 2007′
At Benson Quinn Commodities, Jon Michalscheck noted that corn in "all of the key states were seen declining" in the latest week, with the proportion of the overall US crop rated good or excellent falling by three points to 57%, a decline larger than analysts had expected, and below the 70% figure a year ago.
"The plant continues to shut down, and a lack of precipitation in an estimated one-third of the crop appears to be speeding up the process," Mr Michalscheck said.
ANZ’s Paul Deane said: "It is looking remarkably like 2006 and 2007, both years of below-trend yield."
However, while both those years had seen conditions improve from late August onwards, there is "little relief on the radar for the next seven days" in terms of rain needed for drier Midwest areas.For soybeans, the national good or excellent rating declined by two points to 59%, compared with 64% a year ago.