Weather focus sharpens post-WASDE report
In its monthly World Agricultural Supply and Demand Estimates (WASDE) report released Thursday morning, USDA trimmed corn stocks and harvested area, but left yield unchanged, adding up to a 14-billion-bushel corn crop projection and a supply on hand down 90 million bushels from the July estimates.
"Corn production for 2013/14 is lowered 55 million bushels with the lower harvested area and the projected yield unchanged at 156.5 bushels per acre. Projected production remains just below 14 billion bushels and would be 858 million above the record in 2009/10. Corn supplies for 2013/14 are lowered 90 million bushels as a 5-million-bushel increase in imports only partly offsets the lower beginning stocks and production," according to Thursday's WASDE report. "The soybean yield is projected at 44.5 bushels per acre, unchanged from last month. Soybean supplies are 30 million bushels above last month’s forecast reflecting the production change. With projections for exports and crush unchanged, 2013/14 soybean ending stocks are raised 30 million bushels to 295 million. U.S. soybean supply and use projections for 2012/13 are unchanged."
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- See more from Thursday's WASDE report
The change in the numbers didn't do much for the market bulls, at least initially. Prices slumped for the first few hours of Thursday's trade before closing higher as traders' focus shifted to weather. The markets immediately replied by sliding based on the fact USDA kept both stocks and production estimates higher than what analysts expected.
The biggest surprise in Thursday's report, says market analyst and broker Don Roose with U.S. Commodities in West Des Moines, Iowa, is the fact USDA left unchanged the soybean production and stocks numbers. But, Thursday's market response may have just as much to do with an overriding weather focus as it does the government's adjustment of the supply data.
"It's still supply-bearish on corn and beans, but weather is going to trump this report," he says. "The focus snaps back to the weather. That's where we are at right now."
The reason for the weather focus? Though today's conditions are a far cry from the pain of the drought a year ago, a high-pressure system circulating in the Pacific Ocean and periodically surging into the continental U.S. has and could continue to bring hot, dry conditions to regions from the west coast to the Corn Belt. Though the crop weather's normal right now, the prospect for that to change on a dime based on this single weather phenomenon in play right now is what it would take for the bulls to re-enter the grains picture right now, Roose says.
"From our vantage point, we're really watching the high pressure system off the west coast. It's moving around much differently than a year ago. Now it's in the southwest. If that was ever to come in and sit in the Corn Belt, it would be a big deal for the market. That's what shot us up the other day to $5.70 for corn," Roose says. "With these kind of ending stocks, you have to go low enough to buy demand. On the supply side, you're going to have to run into weather problems, tying to this high pressure system.
"It's weather from here forward. You can say the yield is 156 [bu/acre] and crop size is this or that, but if we get into some real problems with weather, that could change quickly."
How would the "parking" of that high pressure system in the Corn Belt affect yields at this point? "If it moves here, with its heat and its dryness, we'll trim our crop in good-to-excellent condition in a hurry," says Iowa State University Extension ag meteorologist Elwynn Taylor. "It is a threat, it's there. And, everybody knows that weather patterns can move east, more often than any other."
But, the movement of that system into the region -- and the chances it will have a serious impact on corn yields -- remain fairly low. Taylor says right now there's about a 30% chance that yields will fall into the "well below trend-line" into the range of around 149 bushels/acre.
Moving forward, there is one crop variable that could influence both yield potential and USDA's assessment of it. Taylor says he's fielded calls from farmers who, even though temperatures haven't been scorching lately like they were this time last year, are seeing corn leaves rolling during the high-sun mid-day hours, but not during cooler morning hours, a symptom of weak root systems stemming from the wet, cool conditions during planting. That means USDA's assessment of the shape of the crop could depend on the time of day when enumerators are taking stock of it.
"One guy said 'Hey, it's not hot. It's in the mid-80s and I have corn rolling up in the middle of the day,'" Taylor says. "There are no roots out there. I said 'And just how bad does your field look in the morning? Maybe excellent, at least good?' I don't know how many fields are like that. Absolutely, it could influence crop conditions."