USDA will release its latest round of USDA crop production estimates at 11 a.m. Friday, and many expect smaller crop sizes compared to the August report. Both corn and soybeans production levels are still expected to be at or near record levels, just not as large as was expected last month.
For corn, production is expected to drop by almost 400 million bushels, or 3.5 bushels per acre. The average trade guess is a yield of 178.3. The soybean crop is expected to be 130 million bushels smaller, dropping by 1.5 bushels per acre.
There are two key issues that have fueled the change in expectations. One is a very dry August, and the other is the derecho that swept through Iowa and part of northern Illinois. The questions about the Iowa crop include: how many acres were impacted and how many acres will be harvested as normal, as silage, or not at all?
While good to excellent ratings are not yield indicators, the weekly Ag Statistics reports are quite telling. At the beginning of August, 71% of Iowa’s corn was rated either good or excellent. This week it was down to 43%.
Every so often a USDA crop production estimate comes as quite a surprise to the market. Sometimes the reaction to the report can last for days. Sometimes it lasts about 10 minutes. A quick spike or drop may not give farmers enough time to take advantage, so it’s recommended to have orders in place before the report is announced.
“When I was merchandising a cash position, I would always put orders in on the topside and the bottomside, about half a cent from a limit move,” says AgriVisor’s Karl Setzer. “Now that may sound ridiculous, and it didn’t happen very often … and I’m not saying go limit. But think about having an order in place either to make a sale, or if you have to get some coverage in place if you need some feed.”
Given the recent higher moves in the corn and soybean markets, price protection is warranted, but Setzer also recommends an order at a higher price just in case that order fills. “This market is coiling up, it looks like it’s getting ready to do something. And the volatility from the outside is only going to add to it. We’re still in a weather market, especially in South America. It’s not going to take a huge change in the forecast and we could see big buying … or selling … come in here.”