The August WASDE report is always a big one. While the USDA no longer gets in the field to count ears, it’s generally the first adjustment in yield the market gets to see. With some adjustments on Friday, the market seemed to shift its focus from those production estimates to what it had been trading for several days-weather. As we sort out the complexity of handicapping this 2022 crop, what happens in the next couple of weeks will likely drive market action.

August report recap

Let’s start with the report. The main data most look for immediately is of course yield. With the average trade guess for corn yields at 175.9, USDA coming in at 175.4 was a non-event. While many look toward a tough August in much of the western Corn Belt to limit yields even more, we must remember the yield data was taken as of Aug. 1.

The soybean yield may have been as much of a surprise as anything in the report. With the average trade guess at 51.1 bushels per acre, a 51.9 yield was certainly towards the upper end of the range of guesses. Given August is the all-important month for bean production, a warmer, drier bias has been anything but welcome. While this number was a bit rich for some, beans rebounded nicely with some surmising the trade might expect yield reductions in subsequent reports.

Related:August ’22 WASDE: Markets yawn at corn yields

As far as U.S. and world stocks are concerned, there were no big surprises there either. With both corn and beans coming in within the range of guesses and close to the average trade guess, there simply wasn’t anything exciting enough to steer the market in any one direction.

Market response

So, the big question many asked is why did these markets rally on a day when the numbers weren’t bullish? We must look at how the market has reacted over the last couple of weeks. For December corn, we’ve seen eight straight higher closes, while November beans have rallied 85 cents over those same eight sessions.

The biggest reason for the move from my vantage point is weather. While heat is expected in August, long periods without rain make the situation worse. Given most of Nebraska is currently in some stage of drought while Iowa’s drought monitor looks more ominous by the day, traders are coming to the realization this crop isn’t finishing like they’d prefer.

Last year, we saw a huge drop in prices from the August report to the September report, and this was after a much more bullish report than we received this year. Corn yield was slashed over 4 bu/acre while beans were cut to a sub-50 bu crop. Given the blasé numbers from this year, one might argue similar price action is within the realm of possibilities.

However, I’d point out that in 2021 the crop experienced much better weather than this 2022 crop has has to endure. Below is the drought monitor comparison of the two years, and it’s plain to see the difference, particularly in the western Corn Belt. My contention due to current weather and forecasts is price action is likely to differ from 2021 due to the likelihood this 2022 crop won’t finish in near as good of conditions.

As a producer, the way we use this information varies greatly. While it’s much easier to make a mistake in marketing if you’ve received ample July/August rain, those who haven’t must approach this market in a different fashion. While prices are historically quite attractive, be cautious as to make assumptions on market direction based on what has happened a year ago or any other year. Every year is different-and from my viewpoint, we’re far from knowing everything we need to know about the 2022 crop.

I hope Mother Nature treats you right the rest of this summer.       

Feel free to reach out to me or anyone on the AgMarket team.  We’d love to hear from you.

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