More acreage and yield reductions are likely for soybeans on the horizon given USDA figures reported Sept. 12, says Rich Nelson, chief strategist at Allendale, Inc.
"We have a very tough supply situation laid out in front of us that USDA will have to recognize in the next month or two," Nelson says.
USDA made minor changes to old-crop numbers but still has to realize that exports beat estimates, he says. The soybean yield estimate of 41.2 bushels per acre aligned with the average market guess. In October, USDA is expected to lower soybean acreage, and an Allendale survey of farmers indicates another yield decline is coming.
Meanwhile for corn, the 0.9 bushel-per-acre yield increase to 155.3 might have surprised some in the trade, Nelson says. Importantly, though, that increase didn’t come from the eastern Corn Belt offsetting the western Corn Belt. Rather, it came from southern states such as Kentucky, Tennessee and Georgia.
A decline in acreage is expected in October as crop insurance data are reconciled, and a slight decline in yield also is projected.
"They will trim production a little bit, but this will still be a very burdensome supply, and prices will probably fall from here," Nelson says.
Expect corn prices to make "one last little push" before basis return to traditional negative numbers for the Midwest in the next few weeks, Nelson says. Farmers will need to go back to old-fashioned marketing strategies, paying attention to the spread. The March-to-December spread will probably get back to a storage premium. Holding onto a little bit of corn might make sense.
For soybeans, farmers can expect a good two- to three-month period of potentially higher prices before the South American crop really takes hold and revokes the market, Nelson says. There might be a little basis push going into December and January, and farmers might consider selling cash around the first of 2014.
Coverage, Analysis of the Sept. 12 USDA Reports
See all of the report data, coverage and analysis of the Sept. 12 World Agricultural Supply and Demand Estimates and Crop Production reports.