Corn & soybean unfinished business
The USDA's September corn and soybean production forecasts were reasonably close to the average trade guesses reported before the release of the September Crop Production report. Corn prices drifted lower following the report, reflecting expectations of a crop large enough to allow some rebuilding of stocks. Soybean prices initially moved higher after the forecasts were released, reflecting expectations of smaller forecasts in future reports. Prices have now returned to pre-report levels.
Prices will likely continue to be unsettled as harvest reports become more numerous and the market forms expectations about the October production forecasts. In each of the previous three years, when the U.S. average corn yield was below trend value, the October production forecast was below the September forecast. The difference ranged from 21 million bushels last year to 496 million bushels in 2010. Over the past 30 years, however, the October forecast was above the September forecast in 18 years and below the September forecast in 12 years. This year, there continues to be a range of expectations about both the October forecast and final estimate of the U.S. average corn yield. Yield uncertainty is increased by the generally dry end to the growing season in many areas and by the late maturity of the crop where planting was delayed. Over the past 40 years, the largest declines in the U.S average yield forecast from September to October occurred in 1974 (4.3 bushels), 1995 (4.5 bushels), and 2010 (6.7 bushels). In percentage terms the largest decline was in 1974 (5.5 percent) when widespread early frost damaged a late maturing crop. Barring widespread early frost damage this year, the yield forecast in October is not expected to differ enough from the September forecast to alter the prospects for rebuilding stocks during the year ahead.
Corn production uncertainty this year also comes from uncertainty about the magnitude of the area to be harvested for grain. The USDA's June Agricultural Survey revealed more corn acreage planted and to be harvested for grain then expected by the market. On August 15, The USDA's Farm Service Agency (FSA) released a prevented acres report that indicated 3.4 million acres of corn were prevented from being planted this year due to adverse weather conditions. That report fueled expectations that USDA's National Agricultural Service (NASS) would eventually reduce the estimates of planted acreage and acreage harvested for grain. Typically, FSA certified acreage data is reflected in the October Crop Production report. FSA is scheduled to release updated estimates of planted acreage on September 17. That report will influence expectations for the acreage estimates in the October Crop Production report. Without a change in the yield forecast, prospects for 2013-14 marketing year ending stocks below 1.5 billion bushels would require NASS to lower the harvested acreage estimate by more than two million acres. Such a large reduction seems unlikely.