Forecasts: Corn yields down, beans up; markets uncertain
With grain harvest right around the corner, the United States Department of Agriculture and private companies involved in grain trading are trying to get a handle on what kind of yields and overall harvests farmers will bring in. Those average yields and harvested acres will be all-important in affecting the market price for corn and soybeans.
All during the growing season, the USDA collects weekly crop condition information from farmers in the 18 states where most of the U.S. corn is grown. Grain marketing experts – in private companies and public universities – have looked at that data and tried to use it to estimate what the final grain yields will be at harvest.
Those final grain yields and average production figures will help determine how much grain will be available for sale into the market, for use in feeding livestock and making ethanol and also how much can be carried over. Both of those factors have a big impact on the price. Early in the growing season, the markets are affected by things like late planting or prevented planting from too much rain.
Later in the season, the grain markets are affected by rain or lack of it in the main grain-production regions of the country. This year more than ever, markets have also been affected by geopolitical factors, especially the war in Ukraine, a country which is a major growing region for grain and oilseeds. It is also a major shipping point for grain from its own land and from nearby regions of Russia where grain is produced.
The 18 corn-producing states where the data is collected are where farmers planted 92 percent of the corn last year. Gregg Ibendahl, an agricultural economist with the University of Illinois, published a report on farmdoc.daily explaining how several models have been used and verified over the last 30 years to use the USDA’s weekly crop condition reports to estimate eventual yields of those crops.
The report showed Wisconsin with predicted corn yields of 181.3 bushels per acre – slightly ahead of the 180 actual bushels per acre from last year’s actual harvest. Illinois, with 202 bushels per acre, and Iowa, with 205 bushels per acre were the two highest estimates in the report.
The analysis also showed that corn is likely to be harvested (in those 18 states) from 75.658 million acres – based on the weekly crop condition reports. That would represent a decline from last year of about 4.9 percent. The report estimated that Wisconsin would have 2.976 million acres of corn harvested.
By multiplying the estimated corn harvested acreages for those states by the estimated yield per acre, the economist came up with a total of 14.261 billion bushels, with a range from 13.6 to 14.8 billion bushels. The report noted that early estimates in the growing season generally tend to overestimate yields and that seems to have been true this summer.
Ibendahl noted that the 30-year history of this model has been pretty close to reality although it tends to overestimate yields in a really bad year – that was true in 2012, when much of the Corn Belt experienced serious drought.
Private sources working on their estimates included Pro Farmer which had, by late August, estimated that the U.S. corn crop would be 15.116 billion bushels with an average yield of 177 bushels per acre. They also predicted that the U.S. soybean crop would stand at 4.436 billion bushels with an average yield of 51.2 bushels per acre.
Their projected yield and eventual harvest totals are a bit higher than those coming from USDA. The agency estimated corn would yield 174.6 bushels per acre as the national average with a total of 14.4 billion bushels harvested.
Crop Tour revealing
A Crop Tour, during which market analysts visited farm fields in various regions – from Ohio to Nebraska -- was part of Pro Farmer’s analysis along with other factors like crop maturity, acreage adjustments, comparisons of Crop Tour data versus USDA final yields and areas outside those sampled on the tour.
Pro Farmer analysts said they believed Iowa’s corn yield would be about 198 bushels per acre with bad acres holding back the good acres they saw on the tour. They predicted Illinois would see “pockets of excellence” with a state yield that could end up at 212 bushels per acre – just a couple ticks below USDA’s state estimate of 214 bushels per acre
They pegged Nebraska at 190 bushels per acre and Indiana at 200 bushels per acre.
In their soybean yield estimates for the major growing states, they had Iowa at 57 bushels per acre, Illinois at 66 bushels per acre, Nebraska at 58 bushels per acre, Minnesota at 46 bushels per acre and Indiana at 62 bushels per acre.
In its grain predictions issued August 12, the USDA had forecast that corn production would be down 5 percent from 2021 – to 14.4 billion bushels -- and soybean production would be up 2 percent over last year to 4.53 billion bushels.
That was based on per-acre corn yields that are forecast to be down 1.6 bushels from last year with soybean harvests forecast to be at a half bushel higher per acre than 2021. The USDA based its production and yield estimates on interviews it did with 15,350 producers across the country.
The agency’s National Agricultural Statistics Survey is gearing up to do its September survey in the first few weeks of the month.
Bean prices down
On Friday, September 2, December futures for hard red winter wheat were down 4 ¼ cents to $8.77 a bushel and December corn prices gained 1½ cents to $6.65 a bushel. November soybean futures fell 40 ¾ cents to close at $14.20 ½ based partly on the news that U.S. farmers may be getting ready for a much larger harvest of beans.
Explaining some of what analysts saw on the Crop Tour, Ted Seifried, a market analyst with Zaner Ag Hedge, said that in the eight years he’s done that tour he has pretty much seen what he expected.
“But this year was different. I had an idea in mind and I think all of us did,” he said, speaking on the “Market to Market” program from Iowa Public Television. “It was much different than we were expecting. It was fairly shocking -- really eye-opening. In years past we’ve said that corn is bullet proof. But this year the answer to that is no.”
There is real concern about the overall corn harvest this fall among those analysts, he said, attributing the corn yield losses to the double whammy of heat and drought.
Even the irrigated corn fields were not consistently good, he said. Where they should have been showing yields of 212 bushels per acre, they were at 168 bushels during the tour. “We really have some issues here. Heat has been problem throughout,” he added. “Corn’s really a lot worse than was expected. The beans aren’t great, but not as bad as the corn.”
With the expectations for corn going down and forecasts for beans going up, the market got “big shocks in opposite directions,” he said. “The Crop Tour cut the corn yield pretty aggressively and raised the soybean estimate at the same time. That’s not something you see all that often.”
The soybean yield bump was especially unexpected. “Nobody thought that was possible on an August report. Only 1 out of 16 analysts saw that estimate going higher from an earlier forecast of 51.5 bushels per acre,” he added.
It’s still unknown what with happen with exports. Seifried said that if exports are cut, the lower corn yields will be less of a shock to the market. The fact that China, one of our biggest grain buyers, has its own issues with heat and drought is another wild card in the marketplace.
Strong dollar, inflation effects
Other factors affecting the grain markets are the strength of the dollar coupled with inflation, exports and planned South American crops. Jeff French, with Aghedgers.com noted that the U.S. dollar is now at 20-year highs. “The last time we saw the dollar at these levels, commodities were not at these prices,” he said.
In his analysis, inflation has a lot to do with that – “there is a lot of outside money wanting to buy commodities to ride it up in case this inflation continues. As the dollar goes higher and stays high it will definitely have a negative effect, especially on the export market,” he said, in a “Market to Market” interview on September 2.
The strong dollar may have something to do with the fact that there haven’t been any export sales for several weeks.
French noted that there has been a big supply-side price rally in corn, with private analysts -- two in the past week – forecasting a smaller corn crop. Now without any export reports from the USDA “we’re not seeing where the demand is and that brings in an element of uncertainty -- and markets don’t like uncertainty,” French said.
In general, September corn prices are weaker as harvest looms, but corn prices right now are $1.50 per bushel over the average price seen at this time of year over the last five years, French said.
Soybean prices were lower on the upward yield predictions in the last week and on word that Brazilian farmers are expected to plant 104 million acres of beans this winter.