FORT COLLINS, Colo. (Reuters) - The soybean market has shown little fear over U.S. crop prospects so far this month despite the slow planting and record-late crop development. The complacency has been largely driven by the substantial domestic stockpiles and the longer time frame available to plant beans versus corn.

oybeans sit in a truck as they are loaded at the Ruff Brothers Grain elevator in Leonore, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker/File Photo

However, Chicago-traded soybean futures lit up on Wednesday as the near-term weather forecasts turned wetter, a bad prognosis for a crop that was only 60% planted as of Sunday. While the rally is encouraging to struggling farmers, the prices may still be too unfavorable to proceed, and the weather might ultimately make that call for them.

Further, the acres that have been planted may not reach the high yields of recent years because of significantly delayed development, adding more risk to production and ultimately stocks.

The U.S. Department of Agriculture raised 2018-19 U.S. soybean ending stocks to 1.07 billion bushels on Tuesday based on a cut to exports. New-crop stocks also rose to 1.045 billion bushels, and this was the first time ever that soybean carryout has been pegged to top the 1-billion mark. The previous high was 574 million bushels in 2006-07.

Analysts expected that USDA would make a small cut to soybean production, but they left it unchanged at 4.15 billion bushels. A USDA official said via phone on Tuesday that June is too early to start changing soybean yields, and there are still several unknown factors surrounding planted area at this time.

However, the agency is likely to make some changes to soy production next month, according to USDA chief economist Robert Johansson.

On the other hand, USDA slashed U.S. corn production by 9%, which was close to double what the market expected, and this was based on planting delays and slow crop development.

LATE PLANTING, LOW YIELD?

As of June 9, there were seven U.S. states that had planted less than 50% of intended soybean acres, including top-grower Illinois. Those seven states produced 48% of the national soybean crop last year and overall yield was bolstered by Illinois’ massive 65 bushels per acre.

Nationally, only 60% of the soybean crop had been planted as of Sunday compared with 88% on average. Some 34% of those beans had emerged, far fewer than the average of 73% and by far the slowest pace on record since 1999.

Slower soybean emergence has not been associated with the higher-yielding years, which most often featured yield drags of around 5-10% from the long-term trend. However, the 2019 emergence is so slow compared with prior years that there is literally no comparable example. The cooler-than-normal temperatures expected for at least the next two weeks will not help matters.

University research in top two producers Illinois and Iowa suggests that late April to the first week of May is typically the optimal time to plant soybeans in those states relative to yield. After that, yield potential falls, often by more than 20% if planted well into June.

Looking back at USDA’s objective yield measurements on soybeans, the years in which soybean planting and/or emergence was later generally featured fewer pods and beans than surrounding years. Other factors like severe drought in 2012 also lowered those counts.

TO PLANT OR NOT

With tens of millions of soybean acres left to plant, the question is whether farmers will still push to plant soybeans at this late stage, or if they will even be able to.

The weather does not look favorable for the areas that remain critically behind in planting. The forecast as of Wednesday morning showed that at least 3 inches (76 mm) of rain were likely over the next seven days for most of Illinois, Indiana, Ohio, and Missouri. Normal June rainfall in Illinois is about 4.2 inches (107 mm).

There is still time to plant in these states as the final date for full crop insurance coverage is June 20 for most of Illinois, Indiana and Ohio. Parts of Missouri and Kansas can plant up to June 25 and June 30. The final date in Iowa, northern Illinois, southern Wisconsin and Michigan is June 15.

But prices may be a limiting factor and could drive many farmers to choose prevented planting payments instead unless Chicago prices rally significantly and soon. The average February price of new-crop soybeans was $9.54 per bushel, and this price is used in the calculation of prevented planting payments, which are an option when an insured crop could not be planted by the final date specified by the policy.

November soybeans have averaged around $8.70 per bushel since May 1, well below that insurance price. The contract was trading up as much as 20 cents on Wednesday near $9.07.

Compare that with new-crop corn futures, which have been trading well above the February price of $4.00 per bushel for more than three weeks now. Since mid-May, the average price has been around $4.27, a clear signal to farmers from the futures market to plant corn. That signal has been mostly absent for soybeans.

It is important to remember that USDA’s weekly planting progress numbers do not guarantee that any actual number of acres were planted in a given week. The figures represent the estimated planting intentions as of the observation date, and in a year like this one, that pool could be getting smaller as the weeks go by.

If plantings fall by 1 million acres from March intentions and yield were reduced by 4 bushels from USDA’s current trend of 49.5 bpa, that would cut nearly 400 million bushels off production. Just five years ago, a yield of 45.5 bpa would have been a record. This is not a forecast but a simple exercise to show how sensitive the balance sheet can be with various output losses.

A reduction of this magnitude would likely come with some associated cuts to demand and there are still many uncertainties around trade and demand in China, but it could send carryout back toward “normal” levels much quicker than expected.

While years of overproduction and the trade war with China caused stocks to balloon, the unfortunate circumstances around the 2019 planting season may be offering the soybean market a “get out of jail free” card when it comes to regaining control of U.S. stockpiles, or at least starting the process.

The opinions expressed here are those of the author, a market analyst for Reuters.