Did USDA's January Crop Production Report Reveal a Major Marketing Lesson?
USFR Markets Now 1.14.22
South America's driest production areas are forecast to see some rain early next week, and USDA’s reports this week offered up no big news or surprises. Those two factors pressured soybean prices to close the week, while corn prices closed higher.
Even with no big shocks to the markets in USDA reports, there are a few takeaways from the highly anticipated reports.
“I don't think there was anything really shocking me from the USDA report, I think it's a little bit more surprising of how well the crops performed in the northwestern Midwest with the drought conditions,” says Arlan Suderman of StoneX Group. “I think that speaks a lot to the seed technology we have today. I think it speaks a lot to the mechanical precision that we have in seed placement, etc. And just the farmer abilities to use technology to help the crops be able to handle the adversity.”
Suderman says while the final 2021 production numbers look back at last year’s production, it also provides perspective on future crops. He points out one major lesson farmers should take away from USDA’s Crop Production report this week is how well yields performed in the midst of weather challenges in the northwestern Midwest and Plains.
“I think it's really impressive what we're able to do, but the bottom line is that means the trade is going to be reluctant to believe drought stories going forward,” says Suderman. “And perhaps that could have some influence in South America right now, as well. How bad does it have to get before we have a legitimate short crop like we've seen sometimes over history?”
USDA’s Chief Economist Seth Meyer agrees with Suderman. Despite drought demolishing small grain production in areas of the Plains and West, as well as depleting the hay crop, dryness didn’t dampen yields in states that saw drought the majority of the summer.
“I just agree with Arlan,” says Meyer. “We talked a lot about drought north and west of Des Moines, Iowa. And yet Iowa did 205 bushel an acre, in a year where some folks said parts of the state were under a lot of pressure. Still, we saw record yields when you go straight east of there, all across those states. So we saw some pretty good performance in some of those states that were on the edge of those drought areas.”
Breaking Down the Report
USDA slightly boosted corn-production estimates, but not due to a change in the national yield. Instead, corn saw a bump in total production due to USDA slightly increasing both area planted and area harvested. USDA did find the national average soybean yield in 2021 was slightly higher than in previous reports.
USDA’s changes to U.S. crop production in the January report include:
- Boosting soybean yield to 51.4 bu. per acre, up from the 51.2 bu. per acre forecast in December
- Soybean production up 10 million bushels, thanks to higher total production in both Iowa and Indiana
- Corn production increased by 53 million bushels
- Corn area planted at 93.4 million acres, up from 93.3 million in December
- Corn area harvested at 85.4 million, up from 85.1 million in December
But are the "final" production numbers actually final? That’s a point Suderman brought up considering USDA has a track record of making adjustments to the previous year’s production in Grain Stocks reports months later. While USDA could make revisions later this year, Suderman says USDA’s final 2021 numbers are in line with StoneX estimates.
“It fits pretty well with our customer surveys that we did. Our last customer survey was November 1. But those yields fit pretty well with what we saw,” says Suderman. “And I think we're probably pretty close to the final numbers here. You know, maybe there will be some adjustments September, but I wouldn't expect them to be significant at this point.”
So, why aren’t the final crop production numbers always final? Meyer weighed in.
“It's our best number right now,” says Meyer. “There's always a chance of some administrative data going forward, providing some new information. But I have no reason to believe that this isn't the best number. It certainly is the best number available now. So, I don't anticipate a change. But it's always possible, given what we've seen over the last couple years and some of the unusual events.”
