Markets shrugged off USDA’s bearish record-breaking crop estimates in Friday’s Crop Production report. Some analysts cast doubt on the accuracy of the report’s big production numbers.
“This is likely the largest yield number for the rest of the year,” observed Rich Nelson, chief strategist of Allendale. “A better question is whether the report is right on record production,” he cautioned, noting that a second survey in September will include kernel count and quality.
Corn prices fell immediately after release of USDA's August data, but then rose, and while the report held out good news for soybeans with surging exports, the high overall world supply of soybeans may have pushed prices downward.
Analysts said that despite the surge in production, China’s insatiable demand for soybeans should support the price and could even lift the price of corn, which fell on the bearish USDA numbers. September corn slid to $3.12 soon after the USDA report was released, but then gained to close up $3.22. September soybeans gained, rising to $10.06 soon after the report, but then dropped to $9.99.
“If there is a glimmer of hope, it is that soybeans, even with a record yield, have a demand that is so great,” commented Mike Krueger of The Money Farm in an MGEX post-report conference call. Another positive: While farmers have piled up big stockpiles, funds are short on corn and wheat, and eventually will have to buy, Krueger observed.
However, the biggest surprise and the most bearish of USDA’s report was the world soybean ending stock, according to Mike Zuzolo, president of Global Commodity Analytics in Atchison, Kan.
“The 71.24 MMT ending stocks figure today blew away the highest trade guess,” observed Zuzolo.
Other analysts said the big numbers and lower prices weren’t necessarily a negative.
“Lower prices in the short term are not a horrible thing,” said DuWayne Bosse of Bolt Marketing in Britton, S.D. “We have the cheapest corn and soybean prices in the world,” he observed. “The lower our price, the more demand we will see and the higher prices our producers will get long term.”
Here are some key numbers from Friday’s report:
- Corn yield of 175.1 bushels per acre, which is more than the average trade estimate of 170.6 bushels per acre.
- Corn production of 15.153 billion bushels, which is greater than the average trade estimate of 14.757 billion bushels.
- New-crop corn ending stocks of 2.409 billion bushels, which is greater than the trade estimate of 2.255 billion bushels, and the highest since 1987/88.
- Old-crop corn ending stocks of 1.706 billion bushels, which is lower than the average trade estimate of 1.716 billion bushels.
- Soybean yield of 48.9 bushels per acre, which is more than the average trade estimate of 47.5 bushels per acre.
- Soybean production of 4.06 billion bushels, which is less than the average trade estimate of 3.941 billion bushels.
- New soybean ending stocks of 330 million bushels, which is more than the average trade estimate of 316 million bushels.
- Wheat yield of 54.9 bushels per acre, and wheat production of 2.32 billion bushels.
- New wheat ending stocks of 1.100 billion bushels, which is less than the average trade estimate of 1.114 billion bushels.
So what should farmers, who are facing mounting stockpiles of grain, do? Analysts say buy calls and puts rather than selling at such low prices. “We’re likely to see March corn of $3.50 and $3.60 by the end of the year,” said Nelson.