USDA expected to print big corn, soybean yields on Wednesday
For this week’s USDA August report, the trade will get a good look at what U.S. farmers think about their crops.
While the USDA’s September report will use objective yield plots for its production estimates, this month’s estimates are primarily based on farmer surveys.
On Wednesday, the USDA will release its U.S. Supply/Demand and World Production (WASDE) reports at 11:00 a.m. CT.
The trade is expecting U.S. yield estimates at around 180 bushels an acre (bu./acre) for corn and about 51 bu./acre for soybeans. If realized, it equates to over 15.0 billion bushels of corn production and over 4.0 billion soybean output.
In July, the USDA estimated the average U.S. corn yield at 178.5 bu./acre and a 49.8 bu./acre soybean yield average.
While there are weather uncertainties about some major corn-producing states, the general consensus is that the U.S. may be headed for record-large corn and soybean crops.
Peter J. Meyer, head of grain and oilseed analytics for S&P Global Platts, says that given the price action, the markets, especially soybeans, seem to be bracing themselves for a production increase in August.
“We would expect a slight increase to July’s 15.0 billion bushels of corn production, via a combination of higher yield and a slight downward revision in acreage. In the end, we don’t see much of a change to the July corn carryout, as the World Board is using a .70 coefficient for demand vs. total supply,” Meyer says.
Meyer added, “In other words, any increase in total supply will be met with a 70% increase of that number in demand. The problem with corn demand, as we see it, is that exports are the only segment that can be increased as feed and ethanol are effectively capped.
“In soybeans, the trend will be for a higher yield, probably 50+, but August is such a difficult month to gauge soybean yields that we prefer to wait until mid-September before jumping into that pool,” Meyer says.
Darin Fessler, Lakefront Futures & Options, says he wouldn’t be shocked to see the USDA print estimates similar to the trade’s expectations.
“Personally, however, I do think at the end of the day, nationally, we’ll be below 180, but still a pretty good crop by any historical standard. One good thing about going into the August report, which is typically bearish, is we’ve been selling off into the numbers which may support the market, if numbers aren’t too bearish. But keep in mind we’re also in a bearish seasonal time frame,” Fessler says.
Fessler added, “I’m obviously watching the yield numbers but more important is the production number and what USDA does with exports, ethanol, and ending stocks.
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Overall, after last year’s “surprise” in acres and yield given the flooding, this year’s August WASDE could be a relatively mundane affair, Meyer says.
“The World Board may need to reassess ethanol demand for old crop in the penultimate month of the marketing year, but probably just a slight 25-million-bushel drop. The board’s reaction to China’s new crop buys in both corn and soybeans will be a data point to watch, especially in corn, given uncertainty over production heading into the new marketing year on September 1,” Meyer states.
Fessler says that should the corn yield average number come in below 180 bu./acre, the market will see this as price support.
“For soybeans, anything less than 51.0 bu./acre, it will act as support,” Fessler says.
There’s a lot of uncertainty around Iowa’s yields given the dryness, so the market may need to wait until September or even October to get a handle on Iowa, Meyer says.
“The price trend is certainly not your friend at the moment, but we feel that’s more due to demand loss in corn than higher yields. One thing’s for sure: In August we’ll get a sense of what the U.S. farmer thinks about his or her crops, as the yields will be primarily survey-based. In September, the market will get a sense of what the objective yield plots look like, but not this month.”
Greg Lumsden, product line leader for Cargill’s MarketGuide, agrees that the August and September yield estimates could vary.
“Market expectations continue to go up as we head into the report. Most analysts are looking at condition scores and extended forecasts and ratcheting up their estimates. It is important to note that this report will be based on satellite imagery and farmer surveys and not objective yield samples. Based on this, we feel the USDA will likely come in with a big number on yields. While early indications certainly point to a big crop, there is potential for the yield to come off lofty estimates when we do get into objective sampling in September and October,” Lumsden says.
On Wednesday, analysts see investors watching the USDA’s yield estimates the most.
“Obviously, the yield will be closely watched by traders, but acreage could throw us a curve ball. There was certainly some skepticism on the acres numbers this spring, and we could see revisions to the balance sheet based on planted acres. Also noteworthy, demand looks to be strong going forward and it will be interesting to see how aggressively the USDA begins to incorporate that into their S&D,” Lumsden says.
Oftentimes the trade digests the USDA data fairly quickly and moves on to other fundamental factors. On Wednesday, that pattern could continue, unless the USDA delivers the market a surprise.
“If we get a big surprise on acres or the USDA prints a huge yield, that can certainly depress prices even more,” Lumsden says. “That said, it does feel like we are working to seasonal lows, and most end users will have to step and a get coverage soon. It also feels like the funds are reluctant to build large short positions here with broader macro support for commodities and looming demand later this fall. More than likely we will bounce around the next 30 days and try to find a bottom and then look to work higher post-harvest on strong demand.”