There were some surprises in USDA’s first survey-based estimate of crop production for corn and soybeans last Friday. Whether or not they hold true could change price fundamentals significantly.
According to Al Kluis of Northland Commodities, “The number that really jumps out at me is the projected corn yield of 152 bushels per acre. That would be the largest August projection for a crop yield that we’ve seen and certainly shows that we’re going to have adequate stocks of corn this year and at least next year.”
Kluis noted that USDA has underestimated average corn yield in the August report four of the last five years. “The amount that they’ve underestimated the last two years averaged 800 million bushels. So I think we’re definitely looking at an 11 billion-bushel crop (this year) and if we have a good August and September, indications are that would even become larger.”
Equally surprising for Kluis was the low projection for average soybean yield of 39.8 bushels per acre. “Certainly the Delta crop has been damaged beyond repair and the crops in Nebraska, Kansas, North and South Dakota have been hurt. The soybean number came in 100 million bushels less than what was expected because they also increased abandoned acres.”
In addition, projected soybean use is up significantly, which would lead to ending stocks falling from 570 million bushels to 450 million bushels. “If this proves to be correct, then this will be quite a change fundamentally. But I’m skeptical of this 39.8-bushel yield projection.”
The U.S. spring wheat crop came in close to earlier estimates at 422 million bushels, “which is considered negative for price,” Kluis said. “A lot of the trade estimates were less than 400 million bushels.”
All wheat production, at 1.8 billion bushels, is down slightly from the July forecast and down 14 percent from 2005. Based on Aug. 1 conditions, the U.S. yield is forecast at 38.3 bushels per acre, unchanged from last month but 3.7 bushels below last year.
Winter wheat production is forecast at 1.28 billion bushels, up slightly from last month but 14 percent below 2005. The U.S. yield is forecast at 41.2 bushels per acre, up 0.1 bushel from July 1.
“Projected global ending stocks of wheat are down 5 million metric tons,” Kluis said. “Exports the past week were disappointing. But with the drop in price and the drop in the dollar, we are at a level where we are going to see some end user buying. We should be trading demand and extended weather forecast.”