Bullish report, both corn and soybean yield below expected

By Doug Tenney, Leist Mercantile

The U.S. corn and soybean yield numbers will be easy talking points with the USDA report today. 

However, look beyond those numbers. Instead, focus your attention on the corn tables. First, look beyond the U.S. for the Brazil corn production estimate. Second, back to the U.S. for the two numbers of 2021-22 total corn demand and corn ending stocks.  

Brazil corn production was 87 million tons. Last month USDA was 93 million tons. Total US 2021-22 corn demand was 14.650 billion bushels. Last month USDA was 14.840 billion bushels.

US 2021-22 corn ending stocks were 1.242 billion bushels. Last month USDA was 1.432 billion bushels.

The U.S. corn yield today was 174.6 bushels per acre and the U.S. soybean yield was 50.0 bushels per acre. The average trade estimate for the corn yield was 177.6 bushels while the trade estimate for the soybean yield was 50.4 bushels. USDA last month had the U.S. corn yield at 179.5 bushels and the U.S. soybean yield was 50.8 bushels. 

Shortly after the noon numbers were released, corn was up 25 cents, soybean 18 cents, and wheat 28 cents. Prior to the report, corn was down 5 cents, soybeans down 16 cents, and wheat up 7 cents.

The new crop U.S. yield numbers for corn and soybeans today were published using many factors, including subjective farmer surveys, satellite date, weather data, and yield models. In past years the August report has included objective yield surveys. That survey was eliminated last August due to COVID-19. The objective yield surveys were not reinstated for this August report.

This year August is an anomaly when reviewing the methods NASS used for determining the U.S. corn and soybean yield estimates. It is only the 3rd year in history where NASS did not step into the fields in August to determine new crop corn and soybean yields. To help eliminate some confusion, NASS is the government unit determining yields and acres planted. USDA uses that information to publish the multitude of tables and figures with each month’s WASDE report.

A quick summary of trader’s expectations has US 2021-22 corn and wheat ending stocks decreasing with soybean ending stocks up a miniscule amount. World 2021-22 corn and wheat ending stocks were also expected to be declining. Brazil’s corn production is down significantly compared to last year as they are in the grasp of their worst drought in 50 plus years. As a result of that drought, Brazil will be exporting less corn than the previous year. Brazil is already importing corn from Argentina in an effort to slow down the rising cost for domestic corn. In the past three weeks Brazil has set several new records for domestic corn prices. 

World wheat production is declining as a result of drought in Russia. The wheat production in Russia could be down 10 million tons compared to the July USDA estimate of 85 million tons. Black Sea export prices have seen several increases in recent weeks. In past years Russia has imposed wheat export quotas or an export tax in order to keep adequate domestic supplies available for flour consumption. Lest you think U.S. wheat exports will capture significant export volume due to less Russia wheat production, remember this, U.S. wheat exports only account for 12% of the total world wheat exports. This is a record low percentage for U.S. wheat exports.

USDA has been slow to increase the export demand for new crop U.S. corn. Last month USDA had U.S. corn exports for 2021-22 at only 2.5 billion bushels in spite of that same number for 2020-21 corn exports at 2.850 billion bushels. Since May when USDA published the first tables for new crop corn demand, many have continued to bark the 2021-22 US corn exports were 250-400 million bushels too low. In addition, the ethanol grind for U.S. new crop corn could be 50-100 million bushels too low. Brazil’s drought has severely reduced corn production as well as cutting their sugar production. Ethanol in Brazil is made from both corn and sugar.

Explosive and volatile price action for the grains looks to be the norm as the fall harvest season approaches.

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