U.S. Corn/Soybean Yields Surpassed Trade Expectations

August 12, 2020 03:33 PM
August USDA crop report was slightly bearish
Corn and Soybean futures closed on session highs,
China is buying soybeans again
Grain futures market update

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The August USDA crop report was slightly bearish as U.S. corn/soybean yields surpassed trade expectations. The National Agriculture Statistic Service (NASS) estimated the 2020 U.S. soybean yield at a record 53.3 bushels per acre (BPA) with corn at 181.8 BPA. The yield estimates didn't come as a big surprise relative to what traders had been discussing. What is surprising is that farmers would suggest their yields are that high. The USDA enumerators will likely jump numbers again in the September report.

NASS estimated the U.S. corn crop at 15,278 million bushels, a record with the 2020 U.S. corn yield forecast at a record large 181.8 BPA. The Illinois corn yield was pegged at 207 BPA with Iowa at 202 BPA. Record corn yields were forecast for; WI, MI, MN, SD, PA, KY, TN, GA, and SC. The surprise was that the Iowa’s corn yield was only up 2 BPA from last year at 202 BPA.

The agency estimated 2020 US soybean production at 4,420 million bushels, just below the record of 2018 at 4,430 million bushels. With another bump in the U.S. soybean yield, the U.S. could produce a record soybean crop in 2020 with 6 million acres less than 2018. Record large soybean yields were reported in; SD, MI, IL, IN, OH, MO, KY, and LA. The Iowa soybean yield was estimated at 58 BPA compared to IL at 64 BPA, which seems to be too low. With another few finishing rains, it appears that the U.S. would have a chance at producing a 54-55 BPA soybean yield.

U.S. spring wheat production was increased to 577.5 million bushels with US 2020 All wheat production estimated at 1,838 million bushels with a yield of 50.1 BPA. WASDE cut their forecast of 2020-21 U.S. wheat stocks to 925 million bushels based on a 25 million bushel hike in export demand to 975 million bushels. This increase helped slow the decline in the U.S. farmgate wheat price to $4.50 a bushel.

The Iowa Ag Secretary announced that roughly 10 million acres (1/3 of all Iowa seeded crops) were impacted by strong straight-line winds on Monday. And the Derecho storm-damaged tens of millions of bushels of on and off-farm grain storage. The Secretary indicated that corn could still make a crop, but it's unclear how much will be harvested.

Today’s close was very interesting. It is the market reaction to the overall bearish report. Corn and Soybean futures closed on session highs, and that was mostly tied to the fact that the world carryout numbers move lower. Yields for corn and beans are much higher than anticipated, yet the market after an initial dip turned higher and spent the rest the session pressing the highs into the close. Follow-through action tomorrow will be significant, as corn and beans closed right up against resistance values that will be reflected in the charts below.

China’s restart of buying soybeans again is probably reflective of a bigger need than many are thinking. Stories are coming out of China, how pestilence, flooding on the Yangtze River, and droughts in other areas of this very massive country are drawing on food supplies. Also, some of their storage facilities have ruined grain supplies in them. This could be why China has never totally walked away from the Phase 1 trade agreement, as in fact, they need the grain, and this could be surprising is in the coming months.

The close for today and tomorrow if there is follow through buying, puts the bears on notice, as extreme negative stories have been pushed on this market and maybe mostly priced in. The notorious negative price window of July 15-August 15 comes to a close this weekend. You have to wonder if Monday was about as bad as this gets for the pricing of this window. What’s next is typically a rising value into Labor Day.

 

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About the Author

Eugene Graner is the founder and President of Heartland Investor Capital Management Inc. He is a veteran commodity analyst, and broker with 28 years experience in the industry.