In about a week the trade will have the latest U.S. Department of Agriculture 2011 corn and soybean crop estimates and revised 2011-12 supply and demand projections for those commodities and for wheat. Most eyes will be on the corn number, which if it comes out as expected on Sept. 12, will be well below the department’s initial estimate in August and may keep fueling the fire for strong prices for the next several months.
All indications from the trade as well as from U.S.D.A. data itself point to estimates of lower yields, fewer harvested acres and less production for corn in September than in August. There appears to be less agreement on soybean numbers. There also has been much concern about U.S. durum and spring wheat yields and production, but those numbers won’t be updated until the U.S.D.A. Small Grains Summary on Sept. 30.
In its Aug. 11 Crop Production report, the U.S.D.A. in its initial survey-based forecast estimated 2011 corn production at 12,914 million bus and yield at 153 bus an acre based on conditions Aug. 1. The 2011 soybean crop was estimated at 3,056 bus with a yield of 41.4 bus acre. For corn, the U.S.D.A. number was lower than expected, but since then, the trade has suggested even lower numbers.
The U.S.D.A. in its weekly Crop Progress report rated the corn crop in the 18 major states as of Aug. 28 at 54% good to excellent, 27% fair and 19% poor to very poor compared with a year ago at 70% good to excellent, 20% fair and 10% poor to very poor. The ratings on July 31, the conditions on which the Aug. 11 corn estimates were based, were 62% good to excellent, 24% fair and 14% poor to very poor. The initial ratings for the season as of May 29 had corn at 63% good to excellent, 31% fair and 6% poor to very poor.
A Dow Jones Newswires Market Talk report last Monday said, “Morgan Stanley joins the crowd reducing outlooks for the upcoming corn harvest due to poor weather.” Morgan Stanley forecast the 2011 U.S. average corn yield at 149.5 bus an acre and the soybean yield at 41.7 bus an acre.
Participants on the recent Pro Farmer Midwest crop tour, which included Morgan Stanley, found wide variations in corn and soybean crop prospects across the Corn Belt, with conditions generally worse in eastern and southern areas and better in northern and western parts. Overall, participants forecast lower yield numbers for corn and mixed numbers for soybeans. The tour’s sponsor, Pro Farmer, an advisory service based in Cedar Falls, Iowa, estimated the national average corn yield at 147.9 bus an acre and the soybean yield at 41.8 bus an acre after the tour concluded.
The balance sheets (supply and demand) for corn and soybeans are tight and may get even tighter depending on September production estimates. The question is how much will high prices ration demand, for corn in the form of increased wheat feeding and decreased exports and for soybeans mainly decreased exports?
Futures markets have maintained a strong weather premium with nearby contracts for corn and soybeans setting new contract highs early last week before profit taking trimmed gains at the end of the month and ahead of the holiday weekend. With the corn crop “made” and advancing to maturity, and soybeans fast approaching the same, much of the next market move will come down to how close the U.S.D.A. numbers are to trade expectations.