There is little doubt the focus of the September crop production and World Agricultural Supply and Demand Estimates (WASDE) will be on yield.
This is the first report where USDA uses objective field data and the big question is what did the ample to excess rain in the central and Eastern Corn Belt mean for corn and soybean yields in those areas? Plus, will it be good enough to offset the losses from drought and heat in the Western Corn Belt states?
Corn Yield Estimate Point to a Cut
For corn yield, the average pre-report estimate from Reuters is 178.4 bu. per acre, down 2.3 bu. from August.
The cut is a reflection of the weather extremes in August and early September that challenged the crop according to Mike Castle, senior commodities economist with StoneX.
“The broader pattern is more rain across the area. So, it’s going to be interesting to see how USDA offsets that versus this kind of heat wave that we’ve seen that’s kind of sped up maturity over the last couple of weeks.”
East Versus West
Last year near to record yields in many of the Western Corn Belt states also helped pull up the national corn yield to a record 186.5 bu. per acre. That won’t be the case this year as states like North Dakota are showing 48% of the corn crop in poor to very poor condition, Colorado is at 52%, Kansas at 37%.
Randy Martinson with Martinson Ag says that could also mean a lower yield in the September report.
“I mean, especially when you look at how the crop ratings have been coming in, they’ve been coming in lower, not just for the Northern Plains and the Western Corn Belt, but also for the rest of the Corn Belt as well. So, you know, we’ve been seeing a crop that has been deteriorating,” he explains.
What Corn Yield is the Market Trading?
After the 173.2 bu. per acre yield estimate from Pro Farmer, Martinson says the market is already trading below the average trade guess of 178.4 bu. per acre and could easily be disappointed.
“So if we see something around that area, I think that would be somewhat below that would be supportive. If we come in at that, I think the market will kind of react negatively to this, or at least it won’t be friendly to the corn market,” he says.
There is also a wide range in estimates from Pro Farmer’s 173.2 at the low end to the StoneX estimate on the high end at 182.3 bu. per acre, a 9.7 bu. spread. That could lead to some surprises.
Tightening Balance Sheets
Even if the 178.4 bu. yield was confirmed that still drops corn production 200 million bu. to 15.8 billion bu. When combined with slightly lower harvested acres that pulls ending stocks down to 1.52 billion bu. and put the stocks to use ration under 10%.
Martinson says that is supportive for prices, “I would expect that this will put a floor in the market, prevent it from dropping too low. And it does mean that we will have to continue to try to ration supply.”
Soybean Yield Change Negligible
For soybeans, the trade is not expecting much change in the national yield with the average trade guess at 52.5 bu. per acre, down .2 bu. from August. StoneX came in at 53 bu. per acre.
Castle says that should come as no surprise, “Yeah, I don’t think you’ll see a huge move. Again, just timing is really a big factor there.”
While he doesn’t expect USDA to make a change in September, Castle says weather data backs a little higher soybean yield moving forward.
“If you just look at a precipitation by weighted area of where soybeans are produced in the U.S., looking at that model would tell you they probably need to move yield higher by about half a bushel an acre. I know there were localized issues where there was too much wetness, but in general, that is favorable for soybean yield at the national level,” he explains.
Tight Balance Sheet for Soybeans
If confirmed that yield would put soybean production at a record 4.5498 billion bu. but ending stocks would still tighten to below 300 million bu. according to Castle.
“If you do see USDA actually make some yield cuts you’re talking about a much more material tightening of the balance sheet because of how strong demand side is,” he says.
And Castle thinks demand will be a bigger story than supply for both corn and soybeans after the report.
Demand, Demand, Demand
In fact, Castle and other in the trade think USDA needs to raise old crop corn exports because inspections exceeded USDA’s goal before the marketing year ended.
Some market experts are also calling for the agency to raise old crop soybean exports by 15 million bu.
