The much anticipated August USDA Supply and Demand report had little fanfare. However, the report did confirm that this year's crops appear to be large, with the corn yield increased to 165 bushels per acre, a record figure. Soybean yield expectations are at 44 bushels per acre, which matches last year's record figure. 

The real key may be carryout, or final number when combining supply and demand. For corn, carryout is now estimated at 1.312 billion, down 61 million bushels from last month. With yield at 165 bushels per acre and harvested acres at 81 million, this equates to a total production of 13.365 billion bushels. The USDA left feed usage unchanged and increased exports by 100 million bushels. When taking the stocks figure and then dividing it by usage, this equates to a stocks-to-use of 9.7%, down from 10.3%. The USDA is now suggesting that the average farm price for the 2010/2011 crop will range between 350 and 410. This is up from last month's figure of 345 to 405. As indicated in past Perspectives and Top Farmer Reports, we believe the trend of carryout and stocks-to-usage is important in determining price trend. With the trend of declining stocks and stocks-to-usage, prices have been moving higher. However, short-term harvest pressure may yet exert itself.

The soybean report had a more neutral impact from a carryout figure. U.S. stocks remain unchanged at 360 million bushels. Yield did increase to 44 bushels per acre with production jumping to 3.433 billion. Exports also improved to 1.43 billion bushels vs. 1.370 billion. World stocks-to-usage figure decreased from 27.4% to 25.8%. The report from a world perspective is viewed as slightly bullish, while the U.S. numbers are neutral.

Wheat, of all three row crops, had probably the most supportive news. U.S. carryout dropped to 952 million bushels vs. last month's 1.093 billion. The pre-report estimate was 982 million. Therefore, carryout dropped 30 million bushels from expectations and a 141 million bushels from last month. As for the world numbers, they too were viewed as supportive. Stocks-to-usage dropped from 28% to 26.3%. World carryout narrowed in from 187.1 million metric tonnes down to 174.3. Russian projected production for wheat was 45 million metric tonnes vs. the July estimate of 53 million. This compares a 61.7 million a year ago. Ukraine also experienced a 3 million metric tonne decline from 20 to 17 million metric tonnes, or a change of 15%. 

Today's report certainly gives some insight to what this year's crop size may be. Bear in mind that it is subject to change. Hot weather in August may be reducing yield potential, especially in beans. That in part may explain why beans are trading more than $1.30 off their recent lows. Yet as harvest approaches, and farmer selling picks up at higher prices, there is likely to be a glut of grain available this fall and, therefore, basis will widen and prices will likely be on the retreat. Make sure that you take advantage of rallies along the way and get to a point where you are comfortable, given your current crop conditions.