USDA’s next U.S. corn and soybean production update is Friday, Oct. 11. A wide range of private estimates for both crops’ area, yield, and production are already circulating throughout the market.
U.S. corn and soybean yields continue to be variable as harvest gains momentum, which will be one of the main focuses of the October report.
Here’s where harvest stands as of Oct. 6.
Soybean harvest reached 47% nationwide, versus 37% last year. The five-year average is 34% (Figure 1a).
Corn harvest has been moving a bit slower, with 30% complete. That’s also ahead of the five-year average (27%) for all states in the Corn Belt. Minnesota is the exception (Figure 1b).
The percentage of both crops rated as good and excellent has been consistently higher than last year when corn yield was at a record high and soybean yield was the fourth highest in history. Soybean yield was higher in 2016, 2021, and 2020.
To review, last month the USDA pegged the national average corn yield at 183.6 bushels per acre (bpa), up 0.5 bushels from August. USDA held the average for beans at 53.2 bpa.
Figure 1a: Corn Harvest Progress, Source: NASS/USDA
Figure 1b: Soybean Harvest Progress, Source: NASS/USDA
Fewer bushels on the same acres?
With most market analysts expecting little to no changes in both corn and soybean areas, the market attention will turn to yield numbers.
For corn, the trade range is 3.2 bpa, with expected yields varying from 181.6 to 184.8 bpa, implying an expected production range of 283 million bushels (15,000 – 15,283). The trade average estimates a 0.1 bpa reduction in corn yield, to 183.5 bpa, with production at 15,173 million bushels.
For soybeans, the average trade guess yield will not change in the October report. However, the 2.3 bpa trade range suggests a more significant variability in production, from 4,462 to 4,660 million bushels.
Figure 2a: Survey results before the October WASDE report: Corn yield estimates, Source: Bloomberg
Figure 2b: Survey results before the October WASDE report: Soybean yield estimates, Source: Bloomberg
How much will prices change?
From a risk management perspective, however, the most critical component of your marketing program is managing market movement in response to possible yield changes. Therefore, the main question is: What magnitude of price changes might we see in this report?
As a student of the market, you know this is impossible to answer. What we can do, however, is examine the history of the change in yield in the October report compared to September and look at the change in futures prices the day USDA releases the report (see Figure 3).
Figure 3: Yield and futures prices changes - various October WASDE reports. Notes: 1. No October report in 2013 due to the Federal Government shutdown, 2. There is risk in trading futures and options. Past performance is not necessarily indicative of future results.
In general, a lower yield accompanies a higher price, and a higher yield accompanies a lower price, but not always. For example:
Corn yield in 2017 increased by 1.9 bushels compared to September, but December corn futures increased by $0.03.
Soybean yield declined in 2008 by 0.5 bushel compared to September, but November soybean futures fell $0.70.
It is important to remember that yield changes relative to trade expectations can influence price trends. Plus, surprise changes to demand forecasts both domestically and internationally can potentially offset an adjustment to yield.
A fair amount of uncertainty seemingly surrounds nationwide yields associated with the October report. Some contend corn output will increase even more than indicated in the September report, while others suggest that we will see a decrease.
In this type of environment, it is critical to have your marketing plan in place prior to the release of what could be a market-moving report.
Contact Advance Trading at (800) 747-9021 or visit www.advance-trading.com.
Information provided may include opinions of the author and is subject to the following disclosures:
The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance does not necessarily indicate future results.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
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