MINNEAPOLIS — Higher-than-expected corn production projections “shocked” the market and farmers when it was released Aug. 12 by the U.S. Department of Agriculture.
Unprecedented planting delays combined with more than 19.4 million prevented plant acres had the market thinking lower numbers; however, USDA found different numbers so far.
Brian Basting, Advance Trading research analyst, said in a teleconference “shocking” was the one word that would best describe the August crop production report.
On the corn side, USDA put planted acres at 90 million and a U.S. average yield of 169.5 bushels per acre. What was the trade expecting leading into the report?
The average trade guess for acreage was only 88 million. On top of that, the USDA bumped up its yield estimate from last month’s trend yield estimate of 166 bushels per acre. The average trade guess for yield was 164.9. When you put those two together, production was projected at 13.9 billion bushels and the average trade guess was only 13.193 billion bushels.
What were some of the notable usage estimates?
The USDA did not make any major adjustments to usage. They lowered 2019-2020 exports by 100 million bushels. That was a function of continued competition from South America as well as the Black Sea region. USDA did lower domestic usage by about 25 million. So, again, a negative aspect from not only the much bigger than expected crop but also the lower usage.
The 2019-2020 ending stocks forecast from USDA was 2.181 billion bushels compared to 2.1 billion estimated in last month’s report.
The average trade guess going into this report was 1.62 billion bushels. So, this estimate of 2.181 billion is 561 million bushels above the average trade guess, so the trade was really shocked by the supply side being much larger than expected acreage and yield. It sent the corn market limit-down and we’ll see as we move forward into the fall if that yield number will be realized or if there’s any changes.
Was there anything supportive for any of the major crops in this report?
The report was actually a little supportive of soybeans. Soybeans had a production number of 3.68 billion bushels and the average trade guess was 3.8 billion bushels, so 120 million bushels below the average trade guess. The reason for that was that the 2019 soybean acreage was pegged at 76.7 million acres and the average trade guess was 81 million acres.
The June planted acres report had soybean acres at 80 million, over 9 million less than a year ago, and corn at 91.7 million after planting over 89 million in 2018, although this was tentative as the crops weren’t all in by June 1. Why the move toward more corn acres?
In retrospect as we turn back the clock to this past spring, when the corn/soybean ratio deteriorated — when new crop corn futures gained on new crop soybean futures back in the spring – that really caught producers’ attention and they really made a commitment at that time to switch acres back into corn for 2019. Then the surge to the contract high when December corn on June 17 was $4.73, whatever weather opportunity was available at that time producers took advantage of that to plant. We’ll see how that turns out yield-wise.
The corn/soybean ratio in the spring favored more corn at the expense of soybeans and did show up in the acreage, and then perhaps that mid-June rally perhaps encouraged some last minute corn planting.
Were there any numbers that stood out in the wheat side of the crop production report?
The soft red winter wheat carryout actually declined slightly. Production was essentially unchanged, down a couple million bushels, and exports are up 5 million. So, the carryout for soft red winter wheat was 118 million bushels and was 125 million bushels in last month’s report. It was 158 million bushels last year. Of the wheat classes, the soft red is relatively speaking tighter than last year but that’s not an extremely tight carryout.
What’s weighing on all the wheat classes at the moment, particularly in soft red winter and hard red winter, is the bearish corn production number.
What should be expected going forward?
There’s a long way to go in this growing season yet. That yield is a moving target. It could decrease from that level; it could increase from that level. It’s an unknown. We’re moving into some uncharted territory with regards to late planting and how that might affect yield and we still have the last half of August and all of September. There are some issues to resolve with regards to pollination in some cases but also grain-fill and any early freeze.