More bear than bull surprises

KANSAS CITY, Mo. — There were a few surprises in the U.S. Department of Agriculture’s crop production and supply and demand reports that were more for the bears than the bulls.

Arlan Suderman, StoneX chief commodities economist, gave his analysis of the USDA data and an outlook of what he expects in the months ahead in a webinar after the reports were released Sept. 12.

The USDA had the U.S. average corn yield now at 173.9 bushels per acre and soybeans at 50.1. What do you think may happen to the yield going forward as harvest beings?

Suderman: I expect the corn yield to trend lower in the coming months. As the crop matures and we get the harvesters into the field and we’re weighing more samples, I think we’re going to see ear weights come down and that can be due to test weight, but also smaller seed size.

The coming months, October and November, should tell us a lot. October will tell us most of it with a little bit more adjustment in November.

Corn yields in Iowa are identical to where we were a year ago at 200 bushels per acre. Illinois, though, the big 16-bushel hit year over year at 198. I think these numbers are going to erode lower in the months ahead.

Ear population was the highest we’ve seen in a number of years. Ear population is definitely there.

Ear weight is the key. It was similar to last year, maybe a little similar to 2020, but more than 2018 and maybe less than 2019.

The question is, what’s the trend. My personal bias is we’re going to see ear weights trend lower. We’ll see if that’s the case.

We really didn’t see anything on pod weights for soybeans. Pod population is right in there where we’ve been in recent years, but the pod weights are also right there. That surprised me a little bit.

Let’s remember the bulk of the crop was not yet mature (when the survey was taken). So, USDA probably didn’t weigh a lot of samples for this.

The next report will do a much better job of telling us whether we’ve got smaller seed size or not.

Overall, what were the key numbers in the balance sheets?

Suderman: Corn, wow, lower yield, higher acreage, and we came in almost where we were a month ago, actually about 19 million bushels higher than a month ago. Nothing there for the bulls.

Soybeans came in 25 million bushels below where we were a month ago, but the trade was looking for something closer to 200 million for ending stocks or lower. That was a big disappointment to the trade.

There was no change in the corn domestic supply and demand other than the acreage increase, increasing the number of harvested acres by 800,000 and that ended up increasing supply, even though the yield was dropped from 175 to 173.8 bushels per acre.

There were some moves on the soybean balance sheet, right?

Suderman: USDA lowered the soybean crush estimate by 10 million bushels. I think they’re under estimating the resolve that these investors in the crush facilities to keep those plants going this year. So, that means if there’s going to be rationing it’s going to have to be by exports.

USDA cut its export target for 2023-2024 marketing year by 35 million bushels in this report and crush by 10 million bushels. So, it’s got that ratio right, but I think it may end up having to increase crush down the road while increasing exports by a little bit more.

There weren’t a lot of changes the soybean balance sheet. Exports was pretty much right in line with where we’re at right now. On old crop I expected 1.99 billion bushels of soybean exports.

As we look at new crop, I’m still more bearish, but about 65 million bushels less than USDA for exports. That’s something we’re going to have to keep our eyes on, but I expect Brazil to really make up that gap.

We know that Brazil has about 160 million bushels of soybeans for export shipment this fall to China.

What we don’t know is what is going to be the impact of estimated dozen or so million metric tons of soybeans that China has accumulated and hoarded since the beginning of the year that it can now dump on the market as we get into the fall of the year when U.S. exports typically own the market.

That we don’t know. I suspect what China is going to do is see how the South American growing season gets started and then it will make its decision.

But I do think it’s understanding crush, cutting it by 10 million, and I think we’re going to end up closer to 2.37 billion for U.S. crush.

What changes of note were made on the global balance sheets?

Suderman: Globally, soybean stocks came in a little higher than what the trade expected, certainly higher for corn, and much lower for wheat because USDA cut production estimates for the current year for Argentina, for Australia, for Europe, kind of almost across the board in all the major exporting countries with the exception of Russia.

Russia continues to dump record amounts of cheap wheat on the world market, USDA increasing exports to 49 million metric tons coming from Russia. That’s a tremendous amount of exports currently being done by Russia.

What are some other factors going forward to monitor?

Suderman: Don’t underestimate the impact on demand that low water levels on the Mississippi River and on the Panama Canal will have to demand. That is the No. 1 concern right now.

China is watching both the delays and the cost of shipping closely, and I anticipate that’s going to continue to hurt our export program for corn and soybeans. Don’t underestimate that impact moving forward.