Soybean Surprise: Prices Jump After USDA Lowers Yield Estimate
Corn and soybean production will both be down from 2021, according to USDA’s September Crop Production report. That news sent prices higher for both markets.
Corn production for grain is forecast at 13.9 billion bushels, down 3% from the previous forecast and down 8% from 2021. Based on conditions as of Sept. 1, yields are expected to average 172.5 bu. per harvested acre, down 2.9 bu. from the previous forecast and down 4.5 bu. from last year.
Total planted area, at 88.6 million acres, is down 1% from the previous estimate and down 5% from the
previous year. Area harvested for grain is forecast at 80.8 million acres, down 1% from the previous forecast and down 5% from the previous year.
Soybean production is forecast at 4.38 billion bushels, down 3% from the previous forecast and down 1% from 2021. Based on conditions as of Sept. 1, yields are expected to average 50.5 bu. per
acre, down 1.4 bu. from the previous forecast and down 0.9 bu. from 2021.
Total planted area, at 87.5 million acres, is down 1% from the previous estimate but up less than 1% from the previous year. U.S. harvested acres for soybeans is forecast at 86.6 million acres, down 1% from the previous forecast but up less than 1% from 2021.
“The big surprise was in the yield cut going down and 50.5 bu.,” says Bill Biedermann, co-founder of AgMarket.net. “That was 1 bu. more than the average trade guess.”
USDA’s soybean outlook for 2022/23 include higher beginning stocks and lower production, crush, exports, and ending stocks. Higher beginning stocks reflect a lower export forecast for 2021/22.
The crush forecast is reduced 20 million bushels and the soybean export forecast is reduced 70 million bushels on lower supplies. Ending stocks are projected at 200 million bushels, down 45 million from last month.
The U.S. season-average soybean price is forecast at $14.35 per bushel, unchanged from last month.
“The key for soybean is this puts a ton of pressure on South America to produce that 150 million metric (MMT)ton crop that everybody's talking about now,” Biedermann says.
Currently, USDA has a 149 MMT forecast for Brazil’s soybean production.
“If the Brazilian crop really is at 149, which we won't know that for a few months, that would put more pressure on the U.S. demand sheet and that would encroach on to our pipeline requirements and keep very strong markets in the U.S.,” he says. “Basis would be very, very strong.”
For corn, USDA’s 2022/23 outlook calls for lower supplies, smaller feed and residual use, reduced exports and corn used for ethanol and tighter ending stocks. Projected beginning stocks for 2022/23 are 5 million bushels lower based on essentially offsetting export and corn used for ethanol changes for 2021/22.
Total U.S. corn use is cut 250 million bushels to 14.3 billion. Feed and residual use is lowered 100 million bushels based on a smaller crop and higher expected prices. Exports are cut 100 million bushels to 2.3 billion while corn used for ethanol is lowered 50 million to 5.3 billion. With supply falling more than use, ending stocks are down 169 million bushels to 1.2 billion.
The season-average corn price received by producers is raised 10¢ to $6.75 per bushel.
“We still only have a carryover stocks-to-use number of 8.5%, which is extremely tight,” Biedermann says. “So, there's really no room to lower it anymore. If they lower yield, they're going to have to lower demand, and I don't know how to lower demand any more than they already have. They made some substantial cuts in the demand on this report.”
What Marketing Moves Should Farmers Make Now?
The big question now, Biedermann says, is: What does a farmer do now?
“If you were 50% sold going into this and if you've got bin space, this report is telling us you would want to store that grain and expect basis to be pretty strong throughout into the spring,” he says. “The stocks-to-use ratios are still extremely tight on a historical basis. With these numbers, the odds are the crop will continue to get smaller.”
In fact, he says, when USDA drops the national average yield in its September report, there’s a 70% chance we’ll see further reductions.
Matt Bennett, co-founder of AgMarket.net, provides market analysis with AgDay’s Michelle Rook:
