USDA Slashes Corn Yield in August Report, Projects Corn to Miss Trendline Yield

USDA’s August crop production report produced a few surprises, including a 5 bu. per acre cut to the national corn yield. The report sent corn futures up more than 20¢ after the report was published.

Based on conditions as of Aug. 1, USDA says the national corn yield is expected to average 174.6 bu. per acre with total production to reach 14.8 billion bushels. While the production number is 4% above 2020, it missed the average trade guess and come in lower than the 15.16 billion bushels USDA forecasted in July based on a 179.5 bu. per acre yield. The lowest trade guess for yield prior to the report was 175.7 bu. per acre.

WASDE

"We do get these surprises often in August," says Ben Brown, extension economist with University of Missouri. "And we certainly got that this year."

USDA's revised corn estimate is also five bu. per acre lower than what's considered trendline yield. 

The overall cut to the national yield wasn't due to production issues in the eastern Corn Belt. In fact, USDA increased its yield forecast for the eastern Corn Belt and projected a possible record crop in some areas. The revisions largely came from dry areas in the Northern Plains and West. .

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"The eastern part, from Ohio, Indiana and Illinois, is sitting on record yields," says Ben Brown, Extension economist, University of Missouri. "You look at Illinois, at 214 bu. per acre, and you know, the corn looks good. I drove through the eastern Corn Belt this past weekend. That probably influenced my bias a little bit. They're sitting on a record crop, at least according to these numbers today. We'll counter that with the upper Plains where things are a little worse than what we had anticipated. You look at North Dakota, for instance, down more than 20%, year over year."

Brown says in order for USDA to compensate for the lower production, there were revisions made to the demand side. That's as USDA expects Iowa's crop to come in below 200 bu. per acre, but Illinois to rake in a yield of well over the 200 bu. per acre mark. 

"I look at the Illinois number and I sit there and go, 'I'm not really sure I believe 214,'" says Brown. "Could it be there? Yeah, probably. But that's a big number. And and that's something that I think we're probably going to overlook because the the story of the day is the the lower number compared to expectations. Let's not kid ourselves, that Illinois number was quite a bit higher than what we'd expected. And I want to counter that with Iowa, where the derecho in late summer last year, along with the drought that impacted production. So, their yield for this year is about 8% higher than what it was a year ago."

 

Rather than actual field samples, USDA now relies on farmer surveys to help produce the August report.

“I think this is our third year we don't have the objective yield plot data from the actual USDA plots,” says Jarod Creed of JC Marketing Services. “So, you're heavily dependent on survey results and, at the same time, heavily dependent on satellite data.”

As the market continues to digest the latest numbers, as well as watch other yield reports, Brown points out in 2020, August was a pivotal point for corn prices. 

"We printed the low in the in the new crop contract in August," says Brown. "Prices continued to rise all the way through the end of the year into this year, and it has maintained the momentum throughout parts of the year."

He says if you counter that with 2012, which even though that year painted a difference drought scenario across the country with even Iowa and Illinois not catching rains, he says 2012 is the last time the U.S. saw such widespread dryness. 

"In 2012, we printed the high in the new crop corn contract in August," Brown adds. " So, history will tell us it can go either way. I tend to think that we're probably sitting on the higher end of the price projections now as we head into the remaining part of the year."

Story in Soybeans

As expected, USDA made little adjustment to its national soybean yield and production forecast in the August report, but did make a larger cut than some expected. USDA says the national yield is still expected to average close to 50 bu. per acre, which is slightly lower than the 50.8 forecasted in July. Production is estimated to reach 4.34 billion bushels, down slightly from 4.40 billion bushels in July.

"Soybeans, the yield number came down it was it was lower than expected at 50 bushels per acre, not an extraordinary surprise," says Joe Vaclavik of Standard Grain. 

The larger story in other crops came in the wheat market, says Vaclavik, as traders expected more of a downward revision in spring wheat due to drought. 

"In the northern plains, North Dakota places like that, we actually did not see that in this report," Vaclavik says.  "What we did see was a cut to the HRW crop and a huge cut to the projection for Russian wheat production. They went from 85 million down to 72.5 million, which is below,what we've seen from even the private groups in the Black Sea region, which is interesting. So, there was some friendly stuff there in the week."

Questions Surrounding Demand

It wasn't just the supply side that produced surprises in Thursday's reports. USDA cut both corn and wheat feed usage numbers significantly, while also reducing export demand. Soybean beginning stocks were also lowered, which USDA says was based on lower crush numbers and exports. 

"They're estimating here that export demand is going to be below last year by a good 350 to 400 million bushels, despite the fact that we have the largest book of new crop corn exports on record, thanks to early and very aggressive Chinese purchases of new crop corn out of the U.S.," says Vaclavik. "So, there are some things here that that you could argue on the demand side, certainly. We haven't really hurt demand that much, especially in the case of corn exports, despite the high prices."

Brown had a different take from the demand adjustments, saying logistics are still a major concern in shipping the sales currently on the books. 

"To me, those were realistic," says Brown. "We're well within the expectations, just given the weekly shipments that we've seen, you know, the challenges of just sourcing grain, the ship for the old crop, but then even to make the adjustments on the new crop. You know, we're going to with less supply, we're going to ship less corn.

Pro Farmer Crop Tour Kicks Off Next Week

Starting Monday, the Pro Farmer Crop Tour will ground-truth crop production forecasts as the 2021 Pro Farmer Crop Tour kicks off. The tour provides insights into potential corn and soybean yields and gathers scout reports from 2,000-plus fields across seven states – Illinois, Indiana, Iowa, Minnesota, Nebraska, Ohio and South Dakota.

Register and attend nightly meetings in person or watch the nightly broadcast live at 7 p.m. Central each night to receive daily results, scouting observations and historical comparison data from our tour leaders.

Register Now for Crop Tour

 

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