The market could be getting crops dead wrong

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Corn and soybean futures have dropped precipitously this year, and both are trading near 52-week lows. This as cool weather and ample rain have led the USDA to predict a record-setting year for the corn and soybean harvest. But the view from the sky is telling a different story.

When Chip Flory of Pro Farmer recently flew over fields in Iowa and Minnesota to get the 30,000-foot view on this year's harvest—or to be more specific, the 1,000-foot view out of a "tiny little single prop plane"—he was a bit distressed by what he found.

First of all, many fields had "holes" or "washed out spots," where flooding had taken a toll. In addition, Flory saw many field that had gone totally unplanted, which occurs when farmers cannot get their crops planted by a given date (they will then file insurance claims).

The problem is that we have to wait until the middle of August to get preliminary data on these "prevented planted acres" from the USDA's Farm Services Agency. And at that point, the market could be surprised by how many of these unplanted acres are out there.

(Read more: Seed giants try tochange image of GMO crops)

"I don't want to say the USDA's getting it wrong, because the USDA has a process they go through," Flory told "But it's early enough that they just don't have all the data and all the observations that they need to accurately assess everything that's going on out here in northern Iowa and southern Minnesota. As time goes on, and the USDA see how the crop matures, they will obviously be collecting all the data they need."

So if there is a disconnect between what traders and analysts expect out of supply, and what the harvest actually gives, that could be because the crop is so "late" this year—meaning that it hasn't matured as much as it normally would by early August.

"We're at a stage in development that is, in the worst cases, a month behind where it should be," Flory said. "Some of the corn and soybeans are three weeks behind, some are two, but very, very little of it is on time."

Flory blames both a "late planting," and "cooler-than-normal temperatures and cloudy conditions," which slow down the maturation of the crop.

(Read more: Why the crop crunch won't cut your food bill)

The irony is that the problems Flory points out are largely due to the opposite of what plagued crops in 2012. "We had too much rain," he said. "Most droughts are broken by a flood, and the drought of 2012 was broken with a flood in April and May in a wide area of the Corn Belt."

So are corn and soybean futures about to turn around?

The market has been trying to find demand, but eventually, "there will be a realization that we've got a lot of demand in here, so maybe we don't have to take prices any lower," Flory said. "If you get a bit of a supply scare and good demand, that's when you can start to take prices off the low."

But there are still good reasons that prices could continue to decline.

"The funds are piled up on the short side of the market, and until we turn some of the moving averages, it will be tough to get them to even think about buying," Flory said.

(Read more: A hungry world: Lots of food, in too few places)

And that's not likely to happen soon, according to Oppenheimer Chief Market Technician Carter Worth.

"I would think corn and soybeans go lower still in the days and weeks ahead," Worth said. "I would resist the temptation to think they're cheap and to be bought."

TJM Institutional Services Managing Director Jim Iuorio agrees that corn will stay weak.

"On Thursday, December corn broke a key support level of $4.72, and now appears headed to $4.48," he said. But the main story is that "the Midwest continues to experience excellent growing conditions, with cool and wet weather."

Rich Ilczyszyn of iiTrader agrees that "corn is in a downtrend," and similarly points to expectations of strong supply: "A few private services have increased acreage estimates, which would add to bottom line stocks in corn."

It is true that many forecasters believe the wet weather will boost the corn and soybean supply. But on the other hand, corn and soybeans may have gotten too much rain for their own good—as Flory's view from the skies could be indicating.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

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