Smith: Commodity markets dropped sharply after the USDA issued its August yield estimates. Corn and soybean production estimates came in significantly higher than most of the pre-report expectations. Dr. John Newton, American Farm Bureau Federation director of market intelligence, talked about where USDA may have found those extra bushels.
Newton: USDA came out with corn yields that were above trend and soybean yields that were well above the market expectations. I mean, you really saw prices tumble following the report. Where USDA is getting this information is leaning on the crop condition information as much as they are some of their surveys.
Smith: Newton says another big shock in the report was the predicted soybean yield. Combine a record amount of soybean acres planted with the USDA prediction, and Newton said U.S. farmers would put out another record crop.
Newton: Last year, the record crop was due to very exceptional soybean yields, and this year the record crop’s really driven by an expansion in planted area. But certainly, that yield number coming in where it did led to another record crop to be expected for soybeans and that’s really pushed prices lower in the face of a record crop last year and a record crop that came online in South America, another bumper harvest of soybeans in the United States, and in order to move that product, it’s going to move at a lower price.
Smith: Newton says the key thing to remember is these aren’t the final numbers. Late planted corn in several parts of the country means it’s still maturing, so there will be opportunities for USDA to make adjustments in yield projections and planted acreage.
Newton: While I expect the crop size to get a little bit smaller, I don’t think it’s going to get substantially smaller, just because conditions are close to where they were on average. I think crop yields come in around trend and a cut to harvested area should work to pull down, especially on the corn side the ending stocks next year. There’s a lot of uncertainty in the market, any potential reductions in that crop size could provide an opportunity to lock in some more favorable prices for that new crop corn and soybeans.
Smith: Chad Smith, Washington.