USDA's August Reports Came With Questionable Cuts to Demand, Analysts Say

USDA's August Crop Production and World Agricultural Supply and Demand Estimates (WASDE) produced a few surprises, both when it came to possible crop supplies and adjustments to demand. 

"Certainly the corn yield number came down and ended up being quite a bit lower than the trade had expected," says Joe Vaclavik of Standard Grain. "The yield forecast is now 174.6 bushels per acre. So, that in itself is enough to rally the market. There are a lot of other changes, demand changes, overseas changes, but that U.S. corn yield number certainly is the big ticket item here."

Highlights of the report include: 

• Corn yield: 174.6 bu. per acre, down nearly 5 bu. per acre from July
• Production forecast: 14.8 billion bushels, down 415 million bushels from last month
• USDA sees lower supplies, but reduced feed and residual use
• USDA reduced corn and soybean exports
• Wheat production forecast below trade expectations
• All wheat production: 1.69 million bushels, down 49 million bushels from July
• All wheat yield: 44.5 bu. per acre, cut by 1.4 bu. per acre
   

As Vaclavik pointed out in AgDay analysis, the headline on Thursday became the surprising cut to the national corn yield. Ahead of the report, many forecasts pointed to a possible 1 bu. per acre adjustment, either up or down. However, USDA's forecast points to production problem areas in the North and West as the driver of the larger than expected yield cut. 

"It's really in the northwestern 25% to 30% of the Corn Belt, where the drought has been a problem all year long," says Arlan Suderman of StoneX Group. "There's going to be adjustments to this. Some are going to be adjusted up, some are going to be adjusted down. A lot of it's going to be how we feel here in the weeks ahead as we finish out the crop. But I think one of the keys is we saw a smaller corn crop and a smaller wheat crop. And not just domestically but globally. Typically when short one, we see substitution in the feed bunk from the other. This year we saw reduction in both in this report.

Questionable Cuts 

While supply was the story Thursday, Vaclavik says there are a few adjustments USDA made on the demand side that will spark continued questions in the coming weeks. 

"Typically what happens is when they make a big cut to the supply, like they did in the case of U.S. corn production, they'll make demand cuts," says Vaclavik. "They cut their projection for U.S. feed usage and also for exports. The export one sticks out to me, because we have a huge book of new crop corn sales. China's already bought a ton of new crop corn out of the U.S. that they booked, of course not shipped. This is for delivery after September 1. But the fact that they're pegging exports 375 million bushels below last year, it's going to be a head scratcher for some people given the sales."

Pro Farmer Crop Tour Kicks Off Next Week

Starting Monday, the Pro Farmer Crop Tour will ground-truth crop production forecasts as the 2021 tour kicks off. The tour provides insights into potential corn and soybean yields and gathers scout reports from 2,000-plus fields across seven states – Illinois, Indiana, Iowa, Minnesota, Nebraska, Ohio and South Dakota.

Register and attend nightly meetings in person or watch the nightly broadcast live at 7 p.m. Central to receive daily results, scouting observations and historical comparison data from our tour leaders.

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