Corn Crop Questioned after USDA report; China Soy Demand Soars -Braun

01:48PM Aug 13, 2020
Derecho Damage at Kelly Sheets Farm
( Kelly Sheets )

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

By Karen Braun

FORT COLLINS, Colo., Aug 12 (Reuters) - Traders knew that the U.S. Department of Agriculture would be forecasting enormous harvests for domestic corn and soybeans even before the outlook was published Wednesday, but that has not removed uncertainty about the size of the corn crop given Monday's damaging storm.

Industry analysts expect that the storm was much more detrimental to corn than soybeans, which are now flirting with record harvest prospects. USDA's soybean yield of 53.3 bushels per acre represented the largest-ever increase in expectations between July and August.

A bigger crop often means more demand, and USDA now sees 2020-21 U.S. soybean exports rising 29% above the current year that ends Aug. 31. Many of those cargoes will be destined for China, which has recently been buying U.S. soybeans at a blistering pace.

Brazil has been making record large soybean shipments to China on top of the Asian country's heightened interest in U.S. product, and USDA recognized that on Wednesday. The top soybean buyer is expected to import 98 million tonnes in 2019-20 and a record 99 million in 2020-21. Those estimates are up 2 million and 3 million tonnes from July, respectively.

Another notable item from the supply and demand report is that USDA did not adjust 2019-20 U.S. corn use for ethanol production for the first time since March. That number stayed at 4.85 billion bushels, and the agency has not touched the 5.2 billion-bushel prediction for 2020-21 since the initial estimate in May.

Despite the heavier-than-expected U.S. harvest pegs, most-active corn and soybean futures both rose a little more than 1% during Wednesday's session, ending the stretch of bearish August report reactions. For both corn and soybeans, that was the most bullish price response on August report day since 2013, and it was also the first time that soybeans ended the day higher since 2013.

NO DERECHO IMPACTS

Monday's Derecho storm that focused largely on Iowa threw a wrench into analysts' production assumptions less than 48 hours before the report, as pictures started going around of flattened corn and destroyed grain bins. Iowa's Agriculture Secretary said on Tuesday that 10 million acres may have been affected across the state.

USDA's National Agricultural Statistics Service said that Wednesday's harvest outlooks were based on conditions as of Aug. 1 via a special note at the top of its crop production report. NASS placed corn yield at 181.8 bushels per acre and production at 15.278 billion bushels, both record highs.

But now some are skeptical of those numbers given that storm losses could reach 400 million bushels, according to some analysts.

Next month's report will be the first to incorporate objective yield measurements such as ear and pod counts. NASS said on Twitter Wednesday that a leaning stalk would be counted in the objective yield survey, but a stalk that is broken off would not.

HIGH PREVENT PLANT

USDA's Farm Service Agency (FSA) published its first round of 2020 acreage registrations on Wednesday, which partially clarified why general planted crop acres were so low in the June survey.

As of July 31, U.S. farmers had registered 9 million acres as prevented from planting. Those are acres that could not be planted within the specified timeframe outlined in a producer's insurance policy. North Dakota accounted for 29%, South Dakota 14%, and Arkansas 12%.

The FSA data is incomplete and will be updated monthly through January, but the 2020 prevent planting total thus far would be the third highest on record behind 19.6 million acres in 2019 and 9.6 million in 2011.

Prevented planting was relatively light between 2016 and 2018, as the final number averaged about 2.6 million acres. The average of the previous three years was much higher at 6.5 million.

Wednesday's data also revealed a low amount of overall registrations, with planted plus failed acres at 226 million. That compares with 233 million reported in August 2019 and between 244 million and 245 million in the previous three Augusts.

This could have been due reporting delays and modified procedures due to the coronavirus pandemic. Principal crop planted acres are expected to be below normal but comfortably above last year, so future FSA datasets should adjust to reflect this if true.