Are corn yields on their way up?

The October USDA supply and demand report often has the potential to be a game changer. Game changers can also be called surprises, which in turn create violent price moves. With that report USDA has the ability to gather actual harvest data to give a much more representative report for U.S. yields. Previous reports were merely estimates based in part upon ear size and plant populations. The trade had expected corn yields to decline compared to the September report. That reduction could then easily pave the way for continuing reduced yields leading into the final production in January 2016. Instead, the corn yield was increased a half bushel with a U.S. yield at 168 bushels per acre. Now the expectation is that the corn yield will again be increasing in successive reports.

By now you may be asking, “How did they do that?” It happens when your state is in the top six and corn yields grow as the season advances. Two of those states would be Minnesota and South Dakota. For months, many had expected corn yields in those western states to be records. It was just a matter of how high is the new record. All season long the question has been, “Would the yields in the western Corn Belt offset the reduced corn yields from the eastern Corn Belt?” Corn production in October was estimated at 13.555 billion bushels, down 30 million bushels from September. Acres were reduced 500,000 acres. That reduction helped offset the yield increase.

Corn prices from mid-September to mid-October had a range of $3.72 to $3.99. The $4 mark has been a huge corn benchmark for the past several months. Producers have been quite content to sock away as much harvested corn as possible. With corn harvest at 42% with the report on October 13, producers had seen great harvest weather in Ohio and the midwest the previous month. Rain events were almost non existent, though timely rains did provide benefits to wheat. While wheat producers are planting fewer acres this fall, those that did get planted by early October are off to a great start.

Weekly soybean exports mid-October were an astonishing 67.3 million bushels. That weekly number was above the high end of trade expectations. It also was the highest weekly total since the start of the marketing year Sept. 1. Those exports along with a U.S. soybean sale to China of 240,000 tons resulted in a daily gain of 26 cents for soybeans as November CBOT soybeans reached $9.15. It was only the second time since the last week of August for November soybeans to penetrate the $9 level. Numerous producers in the western midwest are reporting yields above expectations. It has been fairly common to see producers selling those extra bushels of production.

Traders are already beginning to closely monitor Brazil’s 2016 soybean plantings. Many traders already have ideas that Brazil’s soybean production could be at least 100 million tons. USDA currently has their production at 100 million tons. Last year their production was 96 million tons. Overall planting progress is off to a slow start. Weather in Brazil is seeing less than ideal conditions as of last month. Wet and persistent weather in the south is in sharp contrast to dry conditions in the north.

While weather is always on the minds of producers everywhere, currency worries are not an issue for those in Brazil as of last month. With the currency conversions available to soybean farmers in Brazil, they are seeing the highest revenues for soybeans in the past five years. Without a doubt it adds fuel to the reality of seeing more land in Brazil planted to soybeans in the years to come. Meanwhile producers here in the United States have seen soybean prices below $9, the lowest prices they have seen for many years.

Producers continue to be favoring holding corn into the winter months. With the strong probability of reduced corn production coming from South America, U.S. producers could be seeing less world competition the next six months.