Soybean Crop Size Flirting With a Record -- USDA
There's a whale of a soybean crop sitting out in the field right now, if Tuesday's USDA reports are any indication.
The soybean crop looks to be a monster this fall; Tuesday's report shows a record crop size of 3.82 billion bushels, 16% higher than last year and with an average yield of 45.4 bushels an acre. But that monster crop is far from a foregone conclusion, says Al Kluis of Kluis Commodities.
"Twenty percent of the Corn Belt is dry -- this can impact soybean yields," he says. "Limited rainfall can take the soybean yield lower. This was not as large a yield number as the trade projected."
U.S. farmers will raise, on average, a 167 bushel-per-acre corn crop this year, according to Tuesday's monthly USDA-NASS Crop Production report. That's up just over 2 bushels per acre over the July estimate, but three bushels per acre lower than the 170-bushel average trade estimate.
The total corn crop's seen at 14 billion bushels, up 1% from last year, and the 167.4 bushels per acre is up almost 9 bushels per acre from 2013. "If realized, this will be the highest yield and production on record for the United States," according to Tuesday's report. "Area harvested for grain is forecast at 83.8 million acres, unchanged from the June forecast but down 4% from 2013."
Market reaction wasn't as supercharged as it's been for most of the last few monthly production and World Agricultural Supply and Demand Estimates (WASDE) reports; shortly after the numbers' release, the soybean trade dipped double digits based on USDA's projection of a record-high soybean crop. Corn futures dipped slightly, as did wheat.
"Today’s postreport price action in the corn markets has been somewhat muted because initial bearish reaction to higher total global corn production for the 2014/15 crop year trade seems to have been offset by lower-than-expected per-acre yields and by increased U.S. domestic old-crop corn use resulting in lowered beginning stocks. In the wheat markets, a significant increase in global wheat demand is more than offset by an increase in global wheat production, leaving markets somewhat balanced for now," says Sal Gilbertie, market analyst and broker with Teucrium Trading. "New-crop soybean ending stocks are slightly higher than expected due to continued expectations of record per-acre yields, confirming the expected replenishment of the balance sheet from extremely tight current levels. Overall, the report confirms a robust global supply outlook for all grains."
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- See more from the Crop Production report
In Tuesday's WASDE report, USDA officials show that although projected corn use is raised for both exports and ethanol refining, the expected larger crop has ending stocks estimates higher as well, leading to a 10-cent decline in the agency's projection for season-average farm prices. Now, USDA expects that price to range between $3.55 and $4.25 per bushel, according to Tuesday's report.
"Corn supplies for 2014/15 are projected at a record 15,243 million bushels with the increase in production partly offset by a 65-million-bushel reduction in beginning stocks. Corn use for ethanol and exports are raised 45 million bushels and 20 million bushels, respectively, for 2013/14, based on reported data to date," according to Tuesday's WASDE report. "Projected corn use for 2014/15 is higher with use for ethanol and exports each raised 25 million bushels, and feed and residual disappearance 50 million bushels higher with the larger crop. Projected ending stocks for 2014/15 are raised slightly to 1,808 million bushels."
Soybeans are also expected to see lower prices on account of Tuesday's WASDE data that show expected record yields will offset increased exports and decreased imports.
"The U.S. season-average soybean price for 2014/15 is forecast at $9.35 to $11.35 per bushel, down 15 cents on both ends," according to Tuesday's WASDE report. "Soybean meal and oil prices are forecast at $340 to $380, down $10 at the midpoint. Soybean oil prices are forecast at 35 to 39 cents per pound, down 1 cent at the midpoint."
While he admits the data's "not going to be good for beans at all," Kluis warns against getting too itchy of a trigger finger with Tuesday's data, for a couple of reasons. First, the adjustments in expected crop size and stocks weren't huge from last month's reports. Plus, the lower price trend has been underway for some time. With those conditions in place, it's important to not overreact to quick market responses to the reports and rely on traditional price protections, be them market- or policy-based.
"Prices are down, but stabilizing. If you sell on weakness or buy on strength, you can really get your head handed to you. Be cautious," Kluis says. "If you've got hedges or crop insurance in place, there's no reason to be panicking here. If we don't have an early frost, prices could bounce back in October."
The pace of the market right now also should influence any trading decision based on Tuesday's USDA reports, Kluis adds. "It's not a real high-volume day. Sometimes on these crop report days, it's amazing the volume that's moved. In August, trading volume does trend lower."