USDA’s September World Agricultural Supply and Demand Estimates (WASDE) produced a bit of a surprise with the agency raising their national corn yield estimate. USDA left the soybean yield estimate unchanged, which sparked a bullish reaction in the markets. However, analysts chalk it up to how early it is in the year and the uncertainty around soybean yields in early September.
Leading into the report, surveys showed analysts expected USDA to decrease yields. Instead, the agency bumped the national corn yield by a half a bushel.
USDA’s updated September forecast shows
- U.S. corn yield: 183.6 bu. per acre
- Corn production: 15.2 billion bushels, up 39 million bushels from August
- U.S. soybean yield: 53.2 bu. per acre
- Soybean production: 4.6 billion bushels, down 3 million bushels from August
USDA’s September WASDE report is the first time USDA actually goes into fields to measure yields. The field samples, along with farmer surveys, are then used to update their yield and production forecasts. The change to the national corn yield caught analysts by surprise, according to Matt Bennett with AgMarket.net.
“The crop didn’t finish great,” Bennett said. “I think overall the Corn Belt was fairly dry in the month of August. But I think what USDA found is that obviously there’s a lot of ears out there, and it looks like it’s going to be a pretty good size ear. Corn looks like you’re going to have a pretty big crop.”
Where did USDA’s higher yields come from? The state-by-state breakdown shows even though USDA trimmed the Illinois state yield estimate by 3 bu. per ace, the agency raised Iowa’s yield by the same amount compared to August.
The largest increases came in Texas, where the agency raised the yield from 117 bu. per acre in August to 121 bu. per acre in September, which is a 3.4% increase for the state. Pennsylvania’s yield was increased 3%, from 135 bu. per acre in August to 139 bu. per acre this month.
The biggest declines came to North Carolina where drought has hammered the crop there. USDA now forecasts the state yield to drop to 88 bu. per acre, a 12% decline from August.
Arlan Suderman of StoneX Group points out even with the increase in yields, the corn balance sheet isn’t a disaster.
“I originally thought USDA came up really kind of back in May, fluffed up their demand estimates to keep sending stocks down around below 2.1 billion bushels,” said Suderman. “I feel better about the number now because we have a smaller Black Sea crop and we’re generally expecting acreage to be planted in Argentina to be down 20 to 25%, granted, that’s going to soybeans and that’s bearish soybeans. But if you have a much smaller crop in Argentina, you have a smaller crop in the Black Sea that could boost our exports in the last half the marketing year. I generally agree with the stronger ethanol demand. Cheaper prices are creating demand.”
USDA also adjusted ending stocks for corn, lowering it 55 million bushels to 1.8 billion bushels of old crop. That adjustment was based on increased exports. The agency is forecasting 2 billion bushels of new crop corn.
“USDA raised ethanol by 15 million bushels, you raised exports 40 million bushels,” Bennett added. “And so that 55 million bushels basically of a lower carry out coming into this year offset the 39 million bushels more corn that they came up with production. So, you actually brought carryout down.”
Bullish for Beans?
The soybean side of USDA’s latest report was more mundane. USDA’s decision to leave soybean yields unchanged from the last report, despite the late season dry weather that could impact the crop, might have been the safe move for USDA this early in the season.
“I think the trade was really bracing for much higher yields,” said Suderman. “I think they saw the possibility that maybe we would be up there close to 55 bushels per acre. That was kind of the whisper number, so to speak, not necessarily the average trade guess that was published. So there’s a little bit of a sigh of relief.”
USDA also made revisions to carryout, with old crop soybean carryout now sitting at 340 million bushels, according to USDA. New crop was revised down 10 million bushels from last month to 550 million.
“When you see USDA increased domestic crush a little bit, 5 million bushels for the old crop, not making any adjustments upward on yield overall, you think, ‘Okay, maybe the bad news is into this market.’ I don’t know that we can really take that assumption this early in the game because soybeans are still fill in pods and so there’s a lot of potential changes. I think USDA mostly just took a safe route this month,” Suderman said.
Suderman says what was one of the more interesting details of the changes to soybeans were the soybean pod counts from USDA.
“It was interesting to note that pod counts in this in this report were below year ago levels. And that was a little bit surprising considering the pod populations that Pro Farmer found on their Crop Tour last month. Maybe we lost a lot of pods there in late August. That would be a possibility. But on the other hand, what counters that is you do the math and USDA’s numbers suggest a pretty good sized seed size. You don’t usually lose a lot of pods if you have conditions conducive for good seed size.”
Suderman said bottomline is he thinks USDA wasn’t comfortable in making big changes when the soybeans aren’t fully mature. He called USDA’s September report a “safe route” for siybeans.
“Over the last five years, pod counts have gone up every year of the last five years from September to October by varying amounts, sometimes significantly. So I don’t really think we’ll have a good handle on the soybean crop size until the October report,” Suderman said.
Nonetheless, Bennett points out you can’t discount how hot and dry the month of August was for parts of the U.S., a trend that has continued into September.
“August was pretty darn dry,” Bennett said. “I would say coming into the month of August, most people had a pretty full soil moisture profile. And so you’ve got to think that maybe some of these early beans, especially, had plenty to get to the finish line. Whenever you look at the USDA report, I mean, essentially there wasn’t a whole lot in the way of changes. The crop size didn’t change or just marginally, if you look at the balance sheet, it’s just a slight amount.”
USDA made some steep revisions to their yield estimates in Ohio, Kentucky and Tennessee. USDA lowered the Ohio yield estimate by 6.8%, now at 55 bu. per acre. Tennessee was revised 6% lower, to 46 bu. per acre.
However, Louisiana’s yield was increased 6% to 52 bu. per acre. USA also raised Iowa’s state yield to 63 bu. per acre, a 3% increase from August.
Old crop soybean carryout sits at 340 million bushels, according to USDA. New crop was revised down 10 million bushels from last month to 550 million.
“Carryout did come down 10 million bushels, but it’s still at 550 [million],” Bennett said. “And so this is a big enough crop considering we’re carrying a pretty darn big crop to boot. Now most of the time whenever you raise a soybean yield, it’s like 80% of the time Pro Farmer goes up from the August USDA report, USDA in September also typically goes higher, and that was not the case, but again, there are a lot of pods out there. We just didn’t have enough rain to fill them.”
Burning Question This Fall: Do You Store or Sell at Harvest?
The heat and dry weather means harvest is rapidly approaching for some, while it’s well underway for others. And as farmers weigh the current commodity prices, it’s a big decision this fall: do you store the crop or sell it off hte combine?
Suderman says there are three things farmers need to keep in mind this fall when making that decision.
- Rapid Harvest: “It looks like we’re going to have a weather pattern that facilitates a rapid dry down, which means that harvest of both record corn and soybean crops coming in very quickly, really stretching our our storage facilities,” said Suderman.
- Low Water Levels and Possible Port Strike: “We also could end up with some problems on the Mississippi River with low water levels. There’s even a risk of a port strike by longshoremen on the East Coast as well as the Gulf Coast, and that could create some problems for exports as well,” added Suderman.
- Basis at Risk: “With all of those factors, basis could be at risk. Amount of grain coming on at harvest time could be at risk. So depending on your on farm storage, you need to really pay attention to that risk. If you don’t have the on farm storage, you need to take steps to protect yourself, protect the equity that you’ve built into your farm,” Suderman said.
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