USDA lowers yields as trade anticipated

KANSAS CITY, Mo. — Slightly positive numbers for soybeans and bearish corn and wheat estimates were featured in the U.S. Department of Agriculture’s supply and demand estimates report on Oct. 12.

“The soybean balance sheet is vulnerable, but the corn and wheat balance sheets remain excessively large,” Arlan Suderman, StoneX chief commodities economist, said in a webinar.

He added that while the report had a few surprises, there was nothing out of the ordinary, with lower than expected yield estimates, but all within the realm of possibility.

USDA had the nation’s average corn yield at 173 bushels per acre, down 0.8 from last month. The StoneX yield survey of farmers projects a final average of 175.5 bushels per acre. What do you see in terms of yields going forward?

Suderman: When USDA sampled the first few days of October, 60% of the corn that they sampled was matured, 26% of it was dented, but not yet matured. You compare that with past years in October, it was kind of in the middle of the pack, maybe a little on the low end for crop maturity.

That really surprised me. I thought we had a higher maturity level at that point. So, we may get some more reflection of that in the November production report.

“These markets remain vulnerable to headline risk in both directions.”

—  Arlan Suderman, chief commodities economist, StoneX

The ears per acre population this year is very high, but yet the yield is kind of middle of the pack, maybe a little bit on the low end. That you would translate into lower ear weight which could be fewer kernels per ear, it could be fewer rows of kernels, it could be reduced ear length, it could be smaller kernels.

We generally do not see ear populations grow into November to the January final summary, but yields go in either direction. For example, in 2020 yields took a nosedive from November to the January final. We also saw a nosedive in 2018. On the other hand, they went up last year.

USDA lowered the average soybean yield projection from 50.1 bushels per acre last month to 49.6 bushels this month. The StoneX final yield based on farmer surveys was 50.4 bushels per acre. As was the case with corn, will these hold up?

Suderman: When the USDA yield survey was conducted, 51% of the soybeans had matured in early October. That’s kind of the middle of the pack historically, maybe a little on the low end compared to previous years.

There’s really about 1.5 bushels in either direction in looking at the October to January final summary yields for soybeans over time. That’s going to catch most years except those extreme years.

USDA has lowered its soybean yield in both September and October in six of the past 30 years, lowering it again in November in five of those years by an average of one-half bushel.

There were a little over 1,800 pods per 18 square feet. That’s maybe a little on the high end compared to other years. You really can’t draw conclusions based on the past five years. Some yields between October and the January final summary went up and others went down.

Corn exports were lowered by 25 million bushels and soybeans reduced by 35 million in the October balance sheet. What are some of the factors in that move?

Suderman: There’s a seasonality to export sales and a seasonality to export shipments. For corn, we’re down 54 million bushels from the seasonal pace needed to meet USDA’s export estimates.

Soybeans are down 158 million bushels from its seasonal pace and we’re losing ground fast. China has very little bought for shipment in December or January, but 54% is from the U.S. and the other 46% is from South America in November, and for December it’s 58% from the U.S. and 42% from South America. The U.S. used to own that market in October-December.

That’s a real problem and even with reductions in export sales the last two months for soybeans, I don’t think we’ve hit the bottom yet.

Brazil still has supplies and those supplies are competitively priced, and Chinese buyers are worried about low water levels on the Panama Canal.

Mississippi River water levels remain quite low. Nobody’s complaining, so to speak, no news headline, because we’re not even getting the orders because of the Panama Canal being a problem.

We continue to see low water levels at Panama and ample Brazilian supplies that continues to be a risk for corn and soybean exports.

We’re losing market share. South America is gaining and the U.S. is losing corn market share. The competitively priced stuff is at Brazil and Argentina. That’s where we find the corn that’s the cheapest in the world market.

It’s the same thing for soybean market share that we’re seeing with corn. In 1995-1996, the U.S. had over 70% of the world market share of the soybean trade and Brazil and Argentina had less than 20%. It’s now below 30% for the U.S., while Brazil and Argentina are at 60%.

How did USDA’s changes impact the bottom lines for the corn, soybean and wheat balance sheets?

Suderman: USDA had 670 million for wheat with the bigger crop that we had. There’s nothing bullish about that number.

Corn ending stocks are 2.111 billion bushels. There’s nothing bullish about that number. The question is how much of a yield drop would it take to drop below 2 billion bushels?

Soybean ending stocks of 220 million bushels is something you can get excited about. Not necessarily something to justify running prices up to $16, but it is something that says there are risks out there and the trade better take notice.