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Through the Looking Glass: October’s USDA Numbers

Friday, October 27, 2017
filed under: Marketing/Risk Management

       The October USDA reports, released on Oct. 12, basically verified their August and September corn and soybean yield and production estimates. These are the corn and soybean highlights form the report:
  • Corn — The USDA reduced corn harvested acres by 400,000, but increased the yield estimate from 169.9 to 171.8 bu/ac.  That was a much larger yield increase than anticipated. Domestic demand was increased by 35 million bushels.  The export forecast was left unchanged. U.S. corn ending supplies were increased by an insignificant five million bushels. The USDA made no adjustments to the corn production estimates in Brazil or Argentina. The Oct. 12 corn numbers were neutral, but the market has been oversold technically and the bullish soybean market helped the corn market. There is also the belief that the USDA’s corn production numbers for Brazil and Argentina might be too high based on the developing La Nina.
  • Soybeans — The USDA increased the soybean harvested acreage number by a whopping 800,000 acres, almost twice what was expected. They did, however, reduce the yield estimate by 0.5 bu/ac. The net result was that total production stayed exactly the same as last month. Total demand was also left exactly unchanged. Soybean ending supply estimates dropped because the September 1 soybean quarterly stocks estimate was smaller than expected.  That translated into smaller beginning stocks for this marketing year. The USDA made no changes to their production estimates for Brazil and Argentina.  These estimates could be too high based on the current weather concerns in both Brazil and Argentina.
       These reports were considered neutral to corn and slightly bullish for soybeans. The yield estimates are still surprisingly high considering the corn and soybean weekly crop condition ratings were 12% to 14% less than last year for the entire growing season. The corn and soybean harvests were barely underway when these yield surveys, etc., were conducted.
       Our opinion today, based on the first 35% of the soybean harvest, is that the soybean yield estimate is too high.  We haven’t seen enough actual corn harvest results to have an opinion on what the final yield might be, but 171.8 bu/ac still seems very aggressive. Time will tell.
       The October USDA crop production report is the first of the season that includes sunflower production. The table below shows these sunflower production numbers compared to last year:
All U.S. Sunflower Production
(In 1,000s of Pounds)
2016  2017 % of 2016
2,651,635 1,810,235   68%

       The USDA didn’t break down production by oil vs nonoil, but 85% of the harvested acres are designated as oil sunflower. Total harvested acres of all sunflower was down 12% from 2016. The overall yield per acre is pegged at 1,339 lbs/ac.  That is down 23% from last year’s yield of 1,731 lbs/ac. The drought conditions across the central and western parts of the Dakotas cut yields significantly from last season’s record numbers.
       The U.S. corn outlook is neutral from here. Ending supplies are forecast to be 2.34 billion bushels.  That is just slightly above last year and is a big number. Corn exports are currently running a whopping 36% behind last year at this time. A record corn crop in Brazil is the reason U.S. corn exports are off to a slow start.
       The U.S. wheat outlook is also neutral from current price levels.  Hard red spring wheat supplies will be tight, but hard red winter wheat and soft red winter wheat supplies are big. We anticipate that U.S. winter wheat plantings will decline again from last year’s smallest number since 1919. Russia produced another record wheat crop in 2017 that will offset smaller crops in the U.S. Canada and Australia.
       U.S. soybean ending supplies will increase this marketing year, but not nearly as much as once expected.  Soybean demand always seems to exceed early expectations, and this year will be no exception.
       The USDA doesn’t release a sunflower supply and demand report because the crop is too small.  World sunflower will decline slightly this year, but still be the second biggest ever.  The U.S. sunflower market is really a domestic market.  Exports are not a factor.     
* Mike Krueger is owner of The Money Farm, a Fargo, N.D.-based grain marketing consulting firm.  While the information in this article is believed to be reliable, marketing involves risk, and the author and The Sunflower assume no responsibility for its use.
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