The commodity markets started and ended the week under pressure. A week ago, USDA’s August crop production estimates pointed to a smaller corn crop, but that yield reduction didn’t seem to matter to the markets this week.
Arlan Suderman of StoneX Group says immediately following the report release a week ago, the initial reaction from the algo computers was bearish, as he says those trades are only reaction to what they’ve been programmed.
“That tells me the funds programming those algos had expectations that we’re going to see USDA slash the yields for corn and soybeans, and they were disappointed USDA did not,” he says. “So they sold off those markets hard, then the human element brought those markets back. That was encouraging.”
Suderman says even though USDA didn’t make a large adjustment to soybeans, it’s too early to know where yields could land.
“Are there problem areas? Yes. Are there some really good areas? Yes, I really can’t argue with a trend yield for Aug. 1, because that possibility is still there,” Suderman says .
Suderman says USDA’s decision to trim the national corn yield to 175.4 bu. per acre is something he thinks will be trimmed even more in the months ahead.
“Corn maturation was sped up more by the heat we had this summer, and that tends to lead to smaller kernels, although we’ve cooled down since then,” he says. “But we still have a lot of areas that are dry,” he says. “I think we’re going to see those yields drop down to low 170s. Maybe even more than that. But we’ll learn a lot next week about crop health across the Midwest.”
What the Markets Are Watching
Kristy Van Ahn-Kjeseth of Van Ahn and Company says next week’s Pro Farmer Crop Tour could reveal a lot about this year’s crop potential, especially considering areas of the upper Midwest have seen conditions dry out recently.
“Iowa did get some great rains, some slow, perfect rains the other day, but there’s a lot that needs to come for those other areas and we have a crack at it over the next five days,” she says. “That’s going to be the biggest question. Do we actually see that happen?”
Do USDA’s Yield Projections Stack Up
Suderman says he’s also watching Pro Farmer Crop Tour closely next week, as he wants to see if the scouts discover the same reports he’s hearing anecdotally.
“This Crop Tours is our first opportunity to see how widespread the good is versus how widespread the bad is,” he says, “and to really get a feel for not only ear health on the corn, but how long are the ears? What’s the girth of the ears? How widespread are the tip back problems we’ve been hearing about?”
He’s also keeping a close eye on pod counts. There are reports of shorter beans across the country, but sometimes short soybeans can produce strong pod counts.
Suderman says the 2022 Pro Farmer Crop Tour has the potential to be an even bigger market mover than normal.
“I think there’s a lot of potential energy in this market, so we’ll be looking to see if the Tour does reveal anything that would give the funds that reason to jump back into this market after they’ve liquidated a lot of their positions,” he says. “If it doesn’t, then it comes down to harvest data. But that opportunity is certainly there for it to be a big market mover.”
Van Ahn-Kjeseth says USDA has been aggressive on adjusting the corn yield lower, so next week’s Tour will give some insight into if those cuts are justified.
Follow complete coverage of the 2022 Pro Farmer Crop Tour.
