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January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On-average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

Issues Stemming from January USDA Report

The final 2014 crop production numbers delivered by USDA in the January reports leave three issue unresolved.

The three problems, as identified by University of Illinois Ag Economist Darrel Good, center on the number of corn and soybean acres planted, the surprisingly small amount of corn used in the first three months of the marketing year, and the surprisingly large number of soybeans consumed in that same timeframe.

The difference between the total number of planted acres USDA NASS has reported over time and those officially reported by farmers to FSA , USDA’s Farm Service Agency, has grown. The number of acres planted to wheat, corn, and soybeans as tallied by USDA NASS has steadily grown larger than the number of acres farmers are telling FSA they’ve sown. USDA has not offered an explanation. The difference in 2014 is nearly 9.3 million acres over the three crops says Darrel Good.
He says the changing relationship between NASS acreage estimates and acreage reported to FSA may make early FSA reports less useful in anticipating NASS final acreage estimates.
The second issue is related to how much corn was used in the months of September, October, and November. Those are the first three months of the marketing year. USDA totals 4.25 billion bushels of disappearance of which feed and residual use accounted for 2.198 billion. This number is a 114 million bushels lower than the usage in the same period last year after it was revised down. The problem says the U of I number cruncher is that over time the range of usage represented in the first quarter figure as compared to total usage for the year has gotten wider.
First quarter use is no longer a reliable forecaster of total marketing year consumption. It means a lot of uncertainty will persist in the marketplace about how much corn is being fed to livestock.
The numbers do get better as time passes during the marketing year. The expectation is the March 31 Grain Stocks report will be more accurate.

The third issue with the January USDA figures is also in the consumption numbers. The implied residual disappearance of soybeans in the first quarter set a record. This might mean the size of the 2014 soybean crop was over estimated.
While this is an issue it will not be resolved for several months with some insight coming from the March Grain Stocks report.
Time will eventually fix all three issues, but it is important to recognize them and the potential changes these may bring to the commodity markets.