Supply vs. Demand: Here's What You Need to Know Ahead of USDA's August Crop Reports

The markets are readying for the most recent look at crop production and demand. USDA is set to release the August Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports Thursday, August 12. 

History shows the August report can be a market-mover, but as analysts on U.S. Farm Report pointed out last weekend, USDA's crop production estimate this month won't come from objective yield data gathered in plots. Instead, the estimate will be dependent on farmer yield survey results and satellite data. 

Analysts expect little change to yield, but what about demand? Just this week, China has been on five-day buying spree, which provided some support for November soybean futures. The renewed demand comes as China's robust sales of agricultural goods went quiet this summer. 

"I don't think USDA can make any changes on the 2020/2021 balance sheet until September, or most likely October at the earliest, after the September [quarterly] stocks report," says Jarod Creed of JC Marketing Services. "I do think you have a little bit of risk of seeing somewhere around 100 to 150 million bushel cut, and old crop corn exports that certainly could still be on the high side. But if that actually comes to fruition, it opens up the door to making any changes on the 2021/2022 balance sheet. I wouldn't expect any changes from a demand side for that crop until probably January at the earliest."

Creed calls the current situation a "dead zone" from a demand perspective, unless China's smaller purchases put on the books this week can continue to pick up. 

"Unless you see a new wave of Chinese buying or for that matter, any other countries, I think that the concept of 'high prices to cure high prices' has somewhat come to fruition in the last couple of months as our export sales and - chatter on that front - have been relatively mundane," Creed says.

Creed thinks more confirmed sales are needed to avoid negative headwinds in the first quarter of 2022, as he thinks the U.S. is sitting on a large crop this year. 

Does China need more U.S. grains and oilseeds? Recent flooding impacted a portion of China's production, as Mike North of ever.ag says what China needs will remain a mystery until the country starts making more purchases. 

"The Hainan province has been flooding, and that province represents about 9% of Chinese corn production. There could be a little bit of a retraction in their numbers," says North. "But I'm always the first to say that I never trust data that comes out of China. So, observe their demand. It'll be more a matter of seeing how they come to the table. They were, you know, pretty aggressive buyers when corn was at $5. Now that we're at $5.50, they've seemed to back away a little bit."

North says the soybean sales that started Thursday are a good sign, but some of that interest from China may be due to the recent trucker strike in Argentina which limited the country's ability to load boats. He believes the big factor moving forward will be African Swine Fever (ASF). 

"We haven't seen a mass reduction in herd size like we saw in 2019 and 2018," says North. "But at this stage in the game, it's a mystery at what they're going to need for feed, and how much more they're going to need to offset maybe some of these crop losses they've had."