The U.S. Department of Agriculture’s August World Agricultural Supply and Demand Estimates held big bullish surprises, especially for corn.
In the monthly report, released Thursday, Aug. 11, the agency was aggressive in lowering yield nearly 5 bushels per acre to 174.6 for corn. That pulled production down 415 million bushels to 14.75 billion bushels. Ending stocks for the new crop marketing year were also dropped by 190 million bushels from last month to 1.242 billion bushels.
Ted Seifred with Zaner Ag Hedge in Chicago said the cut to corn yields was a big surprise, especially considering record yields are forecasted for Illinois, Indiana and Ohio versus lower yields in Minnesota and South Dakota.
“I am a bit skeptical of this number,” he said.
However, he says it may signal further yield cuts moving forward and it does indicate prices need to go higher to price in the decrease in expected supply.
“The December corn contract has been in a wedge pattern and could technically have a bullish technical breakout here depending on how we trade for the next few session,” he said.
The USDA also reduced wheat production by 49 million bushels to 1.697 billion bushels, with much of the decrease coming from hard red winter wheat, which was pegged at 1.319 billion bushels, plus white wheat was also dropped.
The all-wheat yield was lowererd 1.3 bushels per acre to 44.5 bushels per acre. U.S. ending stocks were also lowered 38 million bushels from last month to 627 million bushels. The bigger cuts were seen in the global balance sheets, with world ending stocks for 2021-22 being lowered to 279.1 million metric tons, which was a 12.6 million metric ton drop from July. Weather issues resulted from production cuts not only in the U.S., but most notably in Russia and Canada. Russia’s wheat production was lowered by 12.5 million metric tons and production in Canada dropped 7.5 million metric tons to 24 million metric tons.
USDA was more conservative on soybean production cuts with yield lowered just .8 bushels per acre to 50 bushels per acre. However, Seifred said that could change down the road.
“The market is perceiving that if USDA is already lowering yield on soybeans at this early stage, there may be more cuts coming in future reports,” he said.
U.S. soybean production was lowered by 66 million bushels to 4.34 billion bushels, but new crop ending stocks ended up unchanged at 155 million bushels. That is because the agency lowered crush and exports demand both by 20 million bushels. World soybean ending stocks were actually raised in the new crop category to 96.2 million metric tons.