USDA feeds bears more corn in crop reports

USDA feeds bears more corn in crop reports

September crop reports surprise trade as USDA increases forecast for 2013 corn production despite late-season drought in central Corn Belt.

IF you talk to windshield farmers and market analysts, you get the impression that things aren't good in Iowa, at least in terms of the state's parched corn crop.

However, if you read the U.S. Department of Agriculture's September "Crop Production" report, you might never get the impression that anything's amiss.

Despite what many assumed would be a significant reduction in USDA's official yield and production estimates for the 2013 corn harvest, USDA actually increased its estimates by 0.6%, forecasting a 155.3 bu. per acre yield on 89.1 million acres. Traders had been anticipating a yield of 153.9 bu. per acre.

With a crop now 80 million bu. larger than predicted in August (Table 1), USDA is banking on better yields in southern states, where USDA raised yields 2-10 bu. from the August forecast. Kansas and South Dakota each saw significant yield increases of 7-9 bu. per acre.

Iowa, however, is a different story. Despite widespread reports of a crop that is getting worse as the season progresses, USDA trimmed its yield expectations by only 1 bu. in Iowa, and it left yields for neighbors Minnesota and Illinois unchanged from last month's forecast.

Precipitation maps, on the other hand, might lead to some skepticism.

Despite the fact that the summer of 2013 was the eighth wettest on record, according to data from the National Oceanic & Atmospheric Administration, the central region of the Corn Belt is another story entirely, with Iowa, Minnesota, Illinois and northern Missouri each receiving much less rain than normal (Map 1).

While many have labeled the spate of late-season heat and dryness as a "flash drought," the effects have been pretty clear-cut.

According to the Sept. 10 "U.S. Drought Monitor" (Map 2), 52% of the nation's corn-producing regions are now in some level of drought, along with 42% of regions growing soybeans, 44% of winter wheat, 39% of hay and 53% of the nation's cattle inventory.

USDA's Sept. 9 "Crop Progress" report added more fuel to the fire, with Iowa's corn crop now rated only 35% in good or excellent condition and 28% rated poor or very poor. The state's soybean crop condition, meanwhile, was rated 33% good or excellent and 30% poor or very poor.

What's more, the time left for this crop to reach maturity is drawing short. Winter is coming, and the potential for a frost to nip production is quite real. Nationally, corn was only 9% mature as of last week's report, including only 5% of Iowa's corn crop.

Digging into the "World Agricultural Supply & Demand Estimates" (WASDE) report, also released Sept. 12, USDA made no major changes to its corn balance sheet aside from bumping production up to 13.843 billion bu. and ending stocks up to 1.855 billion (Table 1). No demand or acreage adjustments were made, but the trade is expecting something to give in the October report.

"There remains an acreage issue to deal with in the corn market and possibly lower soybean yields in the soybean market yet this fall," said Farm Futures market analyst Paul Burgener. However, "the increase this month for corn gives the crop a little extra room to work with if the acres are reduced. It looks like a big crop is in the offing, leaving little room for big price gains."

For livestock producers, certainly, that is welcome news.

Feed grain supplies overall were projected to be larger based on the September estimates, despite smaller old-crop ending stocks (due to strong demand going into the end of the marketing year). The record-large corn crop, along with increased sorghum production, should allow feeders to get some relief from higher corn prices as USDA lowered its price estimate for the 2013-14 marketing year a dime to $4.40-5.20/bu.

While the reports were bearish for corn, soybeans were a slightly different story. USDA dropped its yield and production forecasts by 3.3% from the August report, figuring a crop of 3.15 billion bu. on a national average yield of 41.2 bu. per acre.

The yield estimate was fairly close to the average trade guess, and as with corn, USDA made no changes to its estimate of harvested soybean acreage. Given the weather, it is highly likely that there is more downside potential for this crop come harvest time.

"The U.S. average soybean yield will be below trend for the third consecutive year," said University of Illinois agricultural economist Darrel Good. "Late-season dryness has reduced the average number of pods per acre in the 11 objective yield states — well below the average number in the period from 2004 through 2011. ... Hot, dry conditions in early September suggest that the October yield forecast will be less than the September forecast."

USDA made some minor changes to its soybean supply and consumption balance sheet, but the end result was an unchanged old-crop ending stocks figure of 125 million bu. (Table 2). Its smaller projection, along with some slight adjustments to the crush and export usage estimates, left new-crop ending stocks 70 million below last month, at 150 million bu.

Accordingly, USDA added $1.15 to its season-average soybean price forecast, with a range of $11.50-13.50/bu. Good said he expects prices to remain in the upper half of that range and to likely peak in October, followed by "erratically lower prices" for the remainder of the marketing year.

 

Market recap

Corn prices settled lower in Chicago, Ill., following the Sept. 12 crop reports. Prices were 3-6 cents lower but were off as much as 12 cents in afternoon trading. Heading into last Friday's session, prices were weak, but there was no major sell-off in the 18 hours following the reports' release, as might have been expected given the data.

For December corn futures, prices lost only 1.5 cents from the previous week's settlement.

In the soybean pit, prices gained more than 35 cents, with November futures settling 37.75 cents higher last Thursday.

Market analyst Arlan Suderman with Water Street Solutions noted that high-frequency traders led prices to a 36-cent range as USDA's reports were released, and prices firmed throughout the afternoon to close stronger.

For the week, the November contract gained 28.85 cents from the previous week's close.

While the October crop reports are another month away, the trade will now look to USDA's estimate of Sept. 1 grain stocks as the next major market-moving data report. USDA will release its quarterly stocks report on Sept. 30.

Prior to the Sept. 12 reports, Good calculated a corn inventory that is likely to be 50-80 million bu. smaller than USDA's most recent projection of 719 million. His calculation was based on the June 1 stocks estimate, along with estimated imports and consumption during the quarter.

 

1. U.S. crop production forecasts, million bu.

 

USDA

Avg.

Trade

USDA

Final

Sept. est.

est.

range

Aug. est.

2012 est.

Corn

13,843

13,620

13,330-14,013

13,763

10,780

Soybeans

3,149

3,140

2,980-3,239

3,255

3,015

 

2. Ending stocks, million bu.

U.S.

USDA

Avg.

Trade

USDA

2012-13

Sept. est.

est.

range

Aug. est.

Corn

661

716

579-800

719

Soybeans

125

124

107-130

125

2013-14

Corn

1,855

1,732

1,147-2,296

1,837

Soybeans

150

165

114-230

220

Wheat

561

551

477-600

551

Global, million metric tons

2012-13

Corn

122.59

123.60

123.00-125.00

123.10

Soybeans

61.55

61.80

59.70-62.70

62.20

2013-14

Corn

151.42

146.93

125.92-152.00

150.170

Soybeans

71.54

71.17

67.10-75.00

72.27

Wheat

176.28

172.76

169.35-175.72

172.99

Sources for Tables: Reuters, Dow Jones, USDA.

USDA feeds bears more corn in crop reports

 

Volume:85 Issue:38

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish