USDA’s Crop Estimates Dominate 2010 News

December 30, 2010 06:02 PM
 
USDA’s Crop Estimates Dominate 2010 News

Editors note: AgWeb editors and readers have weighed in on the top stories of 2010 that will continue to be a major story in 2011. This is the fifth in a five-part series. 

(Read all of the major stories.)

Big late summer crops get bigger as the harvest winds down. That’s what history tells us anyway. It looks like the 2010 corn crop failed its history exam.

The national corn yield in August was projected at 165.0 bu./acre. In September, the number went contrary to historical figures and dropped to 162.5 bu./acre, making the trade uneasy about how much the late summer heat had hurt the crop.

All bets on how high the corn price could get were off when the yield plummeted to 155.8 bu./acre in the October estimates. They finally settled at 154.3 bu./acre in the November report, dropping U.S. carryover projections to 832 mil. bu., which is far below the comfort level of 1 bil. bu.

Soybeans, not to be outdone, went from 44.0 bu./acre in August to 44.7 in September, before falling back to 44.4 bu./acre in October. They finally ended up at 43.9 bu./acre in the November Crop Production Estimates, which brought its ending stocks estimates to 165 mil. bu.

Maybe the crop didn’t get bigger, but the impacts of yield deterioration in the midst of increasing demand make the dwindling U.S. corn supply agriculture’s the top story of 2010. The effects of that will live well into the new year, too.

(Talk about it and see what others are saying in discussions.)

"Who would have thought that in less than one year we would have seen an almost 1 billion bushel drop in corn carryout, over $8 wheat futures on 850 million bushel carryout (fundamentally wrong) and what looked like a comfortable soybean carryout shrunk to 165 mil. bu.," says Haxtun, Colo., farmer Dan Anderson of Anderson Wheat Farms.

This decline in supply has had a major impact on the trading community and how they view numbers from USDA. "My confidence is low in USDA and so is my confidence in how great all this seed is," says Indiana Grain Co. CEO Thomas Grisafi. "It seems like we’ve had bigger and bigger crops each year. Now I’m not a farmer, but it just seemed like you just can’t kill this stuff. So when things started going bad this year, we said ‘let’s not worry about it. It’s still going to yield 220 bu./acre.’ But as you started talking to farmers, you realized those yields weren’t there. Weather trumped all."

Impacts on Economic Recovery. Now Grisafi is watching the weather in South America and wondering how much La Nina will impact that crop.

"After the Russians quit exporting, it was like that Warren Buffett line that you don’t know who is swimming naked until the tide goes out. After Russia quit exporting, you realized China is swimming naked," he says.

On Wednesday, China’s consumption of copper hit an all-time high. That is a clear indicator that China’s growth, at least for now, is not subsiding because copper is used in construction of residential and industrial properties. This leads Grisafi and others to believe that a crop failure, or even a less-than-optimal crop, in any major growing region could have a potentially long-term impact on domestic and international grain consumers that continue to compound.

Gas prices are currently at a two year high and coupled with recent news that home prices continue to decline, he fears U.S. economic policy will try to prop up housing prices. That won’t necessarily be the best thing for average working Americans.

"Our Consumer Price Index (CPI) doesn’t include energy or food. So by the government standards, this won’t show up as inflation, because things like a $300 Blu Ray player is now $99 at Wal Mart. In their eyes, technology is lowering the price of some things.

"The largest amount of inflation comes through wages and we’re not seeing that. The average person who makes $36,000/year, there is massive inflation starting through food and energy. So a CPI that doesn’t include food or energy doesn’t tell the whole story. Who doesn’t buy food and who doesn’t use energy?"

Grisafi also worries about the impact higher feed prices will have on the U.S. meat industry. He points to comparisons being made between today’s bull market and that of 2008. He says the 2008 run up was mostly due to speculative trading, and the market took a quick downturn when the rest of world’s grain producers stepped up their production. This time, it’s real, because all worldwide producers are facing the same situation.

"A drought in Russia not only affects this year’s exports, but also the following year's as Russia will build depleted stocks before exporting grain," says Tim Richter of Saratoga Partnership in Lime Springs, Iowa. "If Russia harvests a good crop, they may be inclined to build reserves to higher levels than previously because of weather uncertainty."

Trust in USDA. Grisafi is not alone in questioning of USDA’s survey data and accuracy. In fact, many farmers on the AgWeb discussion boards have expressed significant doubts in USDA and some even believe the USDA is outright manipulating the numbers.
Corn failed to fully develop in many fields this year, leading to a series of lower USDA crop production estimates this fall. That will have a long-term impact through 2011.

A Mitchell, S.D., farmer’s response in an informal and anonymous survey sums up the feelings of many farmers: "I think one of the top 10 stories of 2010 should be the manipulation of the crop report numbers (intentional or otherwise) by USDA. In my opinion it wasn't just the dropping acreage estimates and deterioration of the corn crop, but also the failure to adjust for the lower test weight corn last January. Should have been a no brainer. Then the issue of 300 million bushels found, lost, and then found again.

"On the acreage thing, this has been beat to death on the discussion page, but with satellite technology and our acreage reports to FSA by the first part of July, they should have an accurate acreage estimate by the weekend after the reporting deadline."

While not questioning the motives of USDA, Anderson’s confidence in USDA has decreased as well. "I read a lot of market information every day and over the last six months have become more intrigued by potentially how far off the USDA crop production and carryout numbers could be for foreign countries, namely China and Russia. It is not hard to find a market analyst’s wire that wonders about USDA's numbers."

Chad Hart, Iowa State University grain marketing specialist, said in a November interview that USDA reports the numbers they have at that time. While he understands the frustration felt by farmers and the trade, the numbers USDA reports were accurate for the information they had at the time.

"USDA does two things," says Hart. "They survey farmers and ask, ‘What do you think you’re going to get?’ But they also go out in the fields and they count the number of ears. If the ears are far enough along they weigh those ears, and what they found in August was a tremendous number of ears per acre and it looked like pretty good weights coming off those ears."

Hart points out that the weight of those ears showed a likely yield of 173 bu./acre in August, but the farmer reports were considerably lower. That is how USDA determined a final estimate of 165 bu./acre in the August report.

The same methods were used in the September report and the October report. Obviously the crop conditions deteriorated. "They came back in in October, they went to those same fields, they went to the same places and they found some of the ear buds didn’t develop. The grain weights didn’t fill out nearly as well as we thought they would," Hart says.

 

 

Back to news


 

Comments

 
Spell Check

No comments have been posted to this News Article

Corn College TV Education Series

2014_Team_Shot_with_Logo

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by QTInfo.com
Brought to you by Beyer
Close