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Will USDA hold steady on yield estimates?

Ag Marketing IQ: History suggests little change in U.S. grain crop sizes, but global conditions point to heavy pressure on soybean prices.

Jim McCormick, Hedging strategist

October 9, 2024

5 Min Read
Corn unloading into semi grain trailer
Rachel Schutte

As of Sunday, Oct. 7, approximately 30% of the corn crop was picked and just shy of 50% of the soybeans was harvested. This quick harvest pace should give the USDA an excellent sample size to compare or reject the current crop size estimate.

We don’t expect many demand-side revisions in the Oct. 11 WASDE report, but the supply side could be interesting. The average trade estimates are for a slightly lowered revision to the corn and soybean crop size as the late summer weather patterns provide less-than-ideal finishing weather for both crops.

The historical relationships between crop conditions and the USDA's October yield estimates indicate the potential for mostly steady crop estimates this month. The U.S. corn rating has held steady for the most part in the past month. The corn crop was rated a 64% good-to-excellent at the end of August compared to 64% at the end of September.

In 10 of the past 22 years, USDA raised its U.S. average yield estimate from August to September. The department then further raised its yield estimate in the October report in seven of those years. The most recent year for this to happen was 2021, when they raised the crop by 1.7 bushels per acre from August to September – and then raised it another 0.2 bpa in October.

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Moreover, in the most recent 15 years, USDA raised yields from August to September five times, with only one of those years seeing a yield decline in October. Even then, the 2018 cut was a minor 0.6 bpa.

For this report, the average trades guess is a slight .03 bpa reduction to 183.3 bpa from the September estimate of 183.6 bpa. Such a change puts the average total production at 15.152 billion bushels.

October crop production has not produced many significant surprises in recent years. The 2021, 2022, and 2023 October reports generally fell within 50 million bushels of the average trade estimate. Deviations from the average estimate have been split evenly between coming in above or below expectations.

As for the USDA corn ending stocks estimate, the trade is anticipating the 2024-25 ending stocks to come in at 1.944 billion bushels, down 113 million bushels from last month's 2.057-billion-bushel estimate. But that’s still higher than last year's 1.812-billion-bushel carryout.

Soybeans down slightly?

The trade anticipates that the soybean crop will fall slightly due to the hot, dry August we experienced. Despite this assumption, soybean condition ratings, like corn's, have hardly budged over the past month.

  • U.S. soybean conditions have dropped 1% in good/excellent to 54% in that category as of Sept. 29, compared to 55% good/excellent as of Sept.1.

  • The average trade guess is that the nation's soybean yield will fall 0.2 bpa to 53.0 bpa compared to 53.2 bpa in September.

  • The trade's total soybeans production estimated is 4.571 billion bushels, down from last month's estimate of 4.165 billion bushels.

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USDA's October soybean production estimate has been a surprise compared to trade expectations. It has had a significant bias for coming in below the average trade estimate, having done so in nine of the last 10 years. The previous year's October report was 40 million bushels "lower than expected" and 69 million bushels below the average estimate for 2022.

  • The trade anticipates 2024-25 soybean ending stocks to be 547 million bushels, down 3 million bushels from last month's 550-million-bushel estimate.

  • That’s still higher than last year's 340-million-bushel carryout.

Is the fall low in?

As for the debate of whether the fall low is in, Friday's numbers could go a long way in determining this. If recent history is any indication, it shows that even though the market can bottom early and make everyone think the low is in, it's not necessarily so.

Last year, December corn bottomed on Sept. 19, then rallied 41¾ cents through Oct. 20. Between Oct. 20 and Nov. 29, the December contract fell 62½ cents, taking out the previous low by 20¾ cents.

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The January soybeans contract also gave the market the false impression of a fall low last year. The January contract bottomed on Oct. 11 and proceeded to rally $1.28¼ through Nov. 15. From Nov. 15 through Jan. 12, the January soybean contract fell $1.92¾ cents, taking out the fall low by 64½ cents.

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Weather pressures soybean market

On the weather front, South American weather is transitioning from its dry season to its rainy one right on time. We believe this will put downward pressure on the soybean market.

This is because if Brazil has a trend-line yield crop or better current projections for 2024-25 world soybean stocks will end up at all-time highs. Stocks to use already are projected at the second highest ever. If this comes to fruition, I will argue that the value of soybeans should be closer to $9 than $11. When you add in a struggling Chinese economy, the downward risk from these levels is high.

If you have questions or would like specific recommendations for your operations and how to manage both old and new crop bushels, don't hesitate to contact me directly at 815-665-0461 or anyone on the AgMarket.Net team at 844-4AGMRKT.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through RJO’Brien in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.

About the Author

Jim McCormick

Hedging strategist, AgMarket.Net

Before joining AgMarket.Net, Jim was a senior broker with a nationally recognized firm and has 24 years of experience as a registered commodity representative, servicing both commercial and individual trading and hedging customers. He specializes in hedging and trading strategies using combinations of forward contracting, futures and options for corn and soybean farmers and livestock producers. He has a Series 3 futures brokerage license and earned a bachelor’s degree in Agribusiness Management from Purdue University.

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