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Exploring Corn & Soybean Stocks

Last week’s Grain Stocks report should reduce the ending stocks for both corn and soybeans this month.

USDA’s quarterly grain stocks estimate suggests there are fewer bushels of corn and soybeans leftover from last year than have been reported so far. University of Illinois Commodity Grain Markets Specialist Todd Hubbs says corn is off by 56 million bushels and soybeans are down 44 million, “I’d say one thing out of the stocks report is the idea that corn and soybean consumption is starting to get stronger as we move through the year. This is especially the case in some areas we didn’t see before like feed. For the soybean ending stocks, USDA adjusted 2016 production. This isn’t a shocker, but it did change the balance sheet.”

I’d say one thing out of the stocks report is the idea that corn and soybean consumption is starting to get stronger as we move through the year. This is especially the case in some areas we didn’t see before like feed.

Having said that, Hubbs admits the 2016/17 projected carryouts for corn and soybeans remain very large. It’s possible to roll forward the September grain stocks report to forward figure the October USDA Supply & Demand table… or at least some of the adjustment. When you do that it shows corn carry out at 2.295 billion bushels and soybean ending stocks at 301 million. It is a matter then, says, Hubbs, of laying off the heavy supply-side against growing consumption - which for the moment is hampered by low river water levels that have been causing transportation problems to the Gulf of Mexico. Hubbs says, “The strong demand, the strong consumption, that we’ve been seeing is a good sign as we move through the next marketing year if we can keep it up. Right now we are suffering under these supply and transportation issues.”

It’s not to say a bullish market is around the corner, but that demand should provide a series of marketing opportunities over the coming months.

Friday’s USDA Grain Stocks Unlikely to Change Corn Market

Friday the United States Department of Agriculture will close out last fall’s harvest and marketing year with the release of the fourth quarter Grain Stocks report. Todd Gleason reports it is not expected to impact the price of corn.

USDA NASS Soybean Objective Yield Pod Weight

Tuesday’s USDA Crop Production report included a very heavy soybean pod weight. Todd Gleason talks with USDA NASS Chief of the Crops Branch about the weight, how it is calculated, and how it might change over time.







State by State & Regional Corn Yields

This map shows the August 2017 USDA Crop Production Report state by state corn yields. Rollover each state to reveal the yield. Darker green colors represent higher yields. The table gives more complete detail and breaks down the nation by region. Note the twelve corn belt states in the Midwest are expected to yield 8.4 bushels to the acre less this year than last. The southern states, while representing only about 1.5 billion bushels of the total expected 2017 production of 14.2 billion show a year over year increase of nearly 14 bushels to the acre.

Todd Hubbs Review August Crop Reports

Excerpt from August USDA Crop Production report.

Corn production is forecast at 14.2 billion bushels, down 7 percent from last year. Based on conditions as of August 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third highest yield and production on record for the United States. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016.

Soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Based on August 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. Area for harvest in the United States is forecast at a record high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Planted area for the Nation is estimated at a record high 89.5 million acres, also unchanged from June.

All wheat production, at 1.74 billion bushels, is down 1 percent from the July forecast and down 25 percent from 2016. Based on August 1 conditions, the United States yield is forecast at 45.6 bushels per acre, down 0.6 bushel from last month and down 7 bushels from last year.







...see USDA Reports page for more complete detail.

How USDA Collects Yield Data

How USDA NASS Gathers Crop Production Report Data

USDA NASS will release the first corn and soybean Crop Production Report of the season Thursday August 10th, 2017 at 11am central. Todd Gleason talks with USDA NASS State Statistician Mark Schleusener (shloy-seh-ner) about how the information is collected and calculated.



USDA Crop Production Reports | a primer with Scott Irwin

A year ago University of Illinois agricultural economist Scott Irwin and Darrel Good wrote an article about how USDA predicts corn yields for the farmdocDaily website. Todd reviews this article with Scott Irwin as a primer to the August Crop Production report.

read blog post



Opening Up the Black Box

We have written extensively about U.S. corn yield forecasts issued by the National Agricultural Statistics Service (NASS) of the USDA (Irwin and Good, 2006; Irwin and Good, 2011; Irwin, Sanders and Good, 2014; farmdoc daily, August 28, 2013; August 29, 2014; August 18, 2016). As indicated in these previous publications, NASS uses two surveys to provide indicators of corn yield prior to harvest. These include the Agricultural Yield Survey (or farmer-reported survey) and the Objective Yield Survey (or field-measurement survey) in major corn producing states. A formal Agricultural Statistics Board (ASB) of NASS statisticians is convened in each month of the forecasting cycle to review yield indicators and determine an official yield forecast. In our previous publications we focused on the survey procedures used by NASS and had relatively little to say about the methodology used by the ASB to combine the various yield indicators and determine an official yield forecast. This omission reflects the fact that NASS has historically provided very little information about this part of the forecasting methodology. Fortunately, several publications have appeared in the scientific literature during the last several years that provide important insights into the nature of the different survey yield indications and the other non-survey information used by the ASB to determine official published yield forecasts. The purpose of this article is to review the information in these scientific articles and provide a more informed understanding of the role of the ASB in generating these important market-moving forecasts.

NASS Corn Yield Survey Indicators

We begin with a brief review of the two surveys that form the backbone of the NASS corn yield forecasting methodology–the Agricultural Yield Survey (or the farmer-reported survey) and the Objective Yield Survey (or the field measurement survey). For the August 2016 forecast, the Agricultural Yield Survey (AYS) included 22,144 operations for all crops and was conducted in 32 states for corn. The sample of farm operations surveyed was drawn from those who responded to the survey of planted acreage in June. The same operations will be interviewed each month from September through November. In the August survey, respondents were asked to identify the number of acres of corn to be harvested and to provide a forecast of the final yield.

The Objective Yield Survey (OYS) is designed to generate yield forecasts based on actual plant counts and measurements. The sample of fields for the OYS survey is selected from farms that reported corn planted or to be planted in the June survey of acreage. Samples are selected in the 10 principal corn producing states. A random sample of fields is drawn with the probability of selection of any particular field being proportional to the size of the tract. For the August 2016 OYS, a total of 4,544 plots were sampled for corn, soybeans, cotton, and winter wheat.

Two counting areas, or plots, are randomly selected in each field. Objective measurements (such as counts of plants and ears) are made for each plot each month during the survey cycle. When mature, the plots are harvested and yield is calculated based on actual production minus an allowance for harvest loss. During the August survey, the operator is asked to verify, field-by-field, the acreage reported in June. For corn, each of the two independently located sample plots in a field consists of two parallel 15 foot sections of row. Each plot is selected by using a random number of rows along the edge of the field and a random number of paces into the field. Enumerators count all fruit and fruiting positions in corn and, if ears have formed, a sample of ears is measured for length and circumference. Just before the field is harvested, both plots are hand harvested and weighed by the enumerator.

At each visit, the enumerator establishes a corn maturity category for the plot, ranging from 1 (no ear shoots) to 7 (mature). Prior to the blister stage the number of ears is forecast based on the number of stalks, ear shoots, or ears and both the weight per ear and harvest loss are forecast based on the 5-year average. From the blister through the dough stage, the weight per ear is forecast based on kernel row length and harvest loss is forecast based on the past 5-year average. Ear weight is measured in the dent and/or mature stage. Harvest loss is measured following harvest.

Prior to maturity and harvest, the OYS corn yield is forecast based on the forecast of the number of ears, the forecast of the weight per ear, and the forecast of harvest loss. Forecasts are based on conditions as of the survey date and projected assuming normal weather conditions for the remainder of the growing season. The OYS forecast of gross corn yield then is based on the following formula:

Gross Yield= [number of ears X weight per ear at 15.5% moisture] ÷ 56

Number of ears and ear weight are either forecast or actual and 56 is a conversion from weight to bushels.

The ASB

The survey and forecasting procedures described above produce a number of indictors of the net yield of corn from the AYS and OYS. It is the job of the Agricultural Statistics Board (ASB) to combine the information from these indicators and determine the official published estimates. How does the ASB actually do this? The latest version of the official NASS publication on yield forecasting programs describes the ASB’s role this way:

“The sample surveys are designed to produce State level estimates of acreage, expected yields, final yields, and total production. The surveys are conducted by each State, and the first level of analysis is done by each State. Each Field Office does its independent appraisal of the relationships between the survey estimates and the final official statistics and forwards this information to Headquarters. While each Field Office is analyzing its survey data, statisticians in Headquarters are doing a parallel analysis of all survey data at the State, U.S., and regional levels. For the major field crops discussed in this paper, a formal Agricultural Statistics Board is convened to review regional indications and determine the official forecast or estimate. This Board is made up of 7 to 10 statisticians representing different divisions of NASS. Each Board member evaluates the regional survey indications and supporting data and determines their forecast or estimate. Each member brings their individual perspective to the review which can result in different conclusions being drawn. Through review and discussion, the Board must collectively reach a consensus and establish the National number. The Board process ensures all perspectives are examined and the national or regional forecast or estimate is the result of a thorough analysis. The summation of the individual State estimates as prepared by each State is compared to the Board number. The Headquarters statisticians will re-examine all national and State data relationships and either adjust State estimates so they sum to the U.S. or change the previously determined U.S. number.”

“The formal meeting of the ASB to establish the final numbers and prepare the report is conducted under ”lock up“ conditions. Lock up begins with a complete isolation of all facilities required by the Board. All doors are locked, windows and elevators are covered and sealed, phones are disconnected, and the computer network inside ”lock up“ is isolated from the full network. Transmitters are not permitted and the area is monitored for electronic signals. Highly speculative data are decrypted only after the area is secure. Only after all security is in place does the Board begin final deliberations. The area remains locked up until a prescribed release time (8:30 a. m. for Crop Production) at which time the report is disseminated in electronic and paper forms.” (pp. 96–97)

While this provides a helpful overview of the ASB in general times, it provides almost no detail on the nature of yield indications, the non-survey information, if any, used to supplement the survey indications, or how the ASB reaches a collective consensus.

In terms of statistical properties, NASS does acknowledge in its official yield forecasting publication that the AYS yield indications are biased:

“Note that AYS data are the respondents’ expected yield. The crop may not be mature and ready for harvest for another several weeks after the respondent has been contacted. Experience has shown these responses tend to be conservative (biased down). Under drought conditions, this bias gets much larger as respondents perceptions of a crop are influenced by current weather conditions. Therefore, the interpretation phase of the review must recognize this tendency and factor it into the final deliberations.” (p. 19)

Likewise, NASS acknowledges that OYS yield indications may also be biased:

“Forecasts of state or regional yields are inherently subject to differ from the final, administratively determined, yield. The difference is due to weather and crop conditions yet to be encountered at the time the forecast is made, the difference between weather and crop conditions in the current year and the historic weather and crop conditions utilized to predict current yields, and systematic non-sampling errors which contribute to forecast error. NASS makes every attempt to minimize the impact of these three sources of error by means of administratively determine final values. These final, sometimes referred to as official, values are used as dependent variables to estimate an ordinary least squares equation with the averages calculated from objective yield samples as the independent variable. For example, each state will have an administratively determined, official corn yield for all previous years. To forecast the official corn yield for the current year, NASS regresses the objectively determined State level average corn yields from previous years to the corresponding official corn yields. This process provides a historical context for weather, biases, and non-sampling errors.” (p. 38)

The fact that both yield indications are biased is interesting in and of itself, but the really important question is by how much and in what direction. We know the direction of bias for the AYS (downward) but neither the direction nor magnitude of bias for the OYS. If the biases are relatively small then this is largely a technical issue that has little practical import, but if the biases are large it becomes an important part of how the ASB generates published yield estimates.

A recent paper by Wang et al. (2011) is the first we know of to present data on actual AYS and OYS corn yield indications for an extended sample period. Figure 1 is taken directly from the Wang et al. article, and it presents: i) the OYS indications for the corn objective yield region and each report release month over 1993–2009; ii) the AYS yield indications for the same corn objective yield region and each report release month over 2001–2009; and iii) the December Agricultural Survey (DAS) corn yield indication for each year over 1996–2009. The objective region yield is simply the weighted-average yield for the objective yield states (10 since 2005) and the DAS is very close to the final yield estimates released in January. After viewing the chart, it is probably more understandable why NASS has been so cautious in disclosing this data previously. The magnitude of the bias in both yield indications is striking. The coarseness of the scales prevents precise measurements, but the upward bias in the OYS, regardless of the release month, varies from around 10 to 15 bushels per acre (using the DAS as the benchmark). The downward bias in the AYS in August ranges from about 10 to 20 bushels, and then generally declines in September and October and is usually, but not always, fairly small in November. The pattern of bias in the AYS yield indications make sense, in that farmer-reported yields should become more accurate as the growing season progresses and harvest eventually is completed.




What this means from a practical standpoint is that the ASB is confronted with substantial bias in its two most important yield indications. For example, based on Figure 1, the final DAS objective region yield for corn in 2009 was about 175 bushels and the August OYS yield indication was around 190 bushels and the AYS yield indication was around 155 bushels, a spread of 35 bushels. A more recent paper by Nandram, Berg, and Barboza (2014) provides precise measurements. They report that the average biases for the OYS objective region corn yield indications relative to the DAS over 1993–2010 were 13.96, 11.62, 13.13, 14.99 and 14.97 bushels for August, September, October, November and December, respectively (note that we assume the bias estimates were stated in bushels but the article does not explicitly state the units). The average differences between the AYS indications and the DAS indications were respectively –12.26, –13.42, –9.81, and –4.10 bushels for August, September, October, and November. These imply AYS/OYS yield indicator spreads that average 26.22, 25.04, 22.94, and 19.09 bushels. It is important to keep in mind that these spreads are not symmetric around zero, as the AYS bias diminishes substantially by November but the OYS bias does not. Assuming these bias estimates are similar to the estimates available to the ASB when making published estimates in recent years, we can use the averages to provide a rough estimate of the OYS and AYS corn yield indications for the objective region in August 2016. The published objective region corn yield this year was 182 bushels, which combined with the bias estimates suggest an OYS yield of about 196 bushels and an AYS yield of about 170 bushels.

From this discussion, it should be obvious that the corn yield indications have to be adjusted for bias by the ASB in order to make useful published estimates. The key is the consistency of the bias across time. Figure 1 suggests there is some variation in the bias for a given report month across years and this likely contributes to the errors in the published corn yield estimates. Nonetheless, there appears to be a strong degree of consistency in the bias from year-to-year and this can be used to efficiently “de-bias” the AYS and OYS yield indications applying standard statistical techniques. The larger question is why the biases exist in the first place. Nandram, Berg, and Barboza (2014) conjecture that:
One possible reason for the bias of the OYS indications is that the measurement process leads to a systematic overestimation of the plant density in a field. Two potential reasons for the biases in the AYS indications are pessimism on behalf of the farmers and exclusion of farms in the largest size stratum from the sampling frame. Large farms are conjectured to have higher average yields than moderately sized farms because of greater investment in advanced technology. (p. 510)

There is also a large literature (e.g., Poate, 1988) that formally evaluates the accuracy of so-called “crop cutting” yield estimates, and the evidence shows that such techniques have a tendency to over-estimate actual yields for a variety of reasons, including variability in population density. So, it is not surprising that the OYS yield indicator is biased upwards. NASS has also been aware of the bias in OYS indications for decades and has conducted extensive research to better understand the underlying reasons for the bias, apparently without great success (Warren, 1985). The underlying reasons for the downward bias in the AYS yield indicator are hard to pinpoint beyond a general conservatism among farmers about yield prospects before harvest. Given the dramatic shrinkage in the AYS bias through November and the fact that the same farms are surveyed each month for a given year, it is unlikely that under-sampling large farm operations is one of the main reasons for the AYS bias, as suggested by Nandram, Berg, and Barboza (2014).

In light of the level and variability of the bias in AYS and OYS yield indications, it is sensible for the ASB to seek out additional non-survey information when generating published yield estimates. The Wang et al. (2011) article provides helpful information in this regard:

Each month (August through December), estimates are produced by the ASB with the primary objective of providing the most accurate projection or end-of-season estimate given the survey indications and standard errors, in addition to other factors. When projecting corn yield, information on crop maturity, planting date, weather conditions, and other auxiliary factors is also taken into consideration by the ASB. (p. 85)

Since two of the co-authors of this paper at the time of its publication were NASS employees, we take this as authoritative evidence that the ASB uses “auxiliary” information when generating published estimates. While the details of exactly what type of auxiliary information the ASB uses when making corn estimates is not available, several recent articles by provide important clues. The stated purpose of the Wang et al. (2011), Adrian (2012), and Nandram, Berg, and Barboza (2014) articles is to basically formalize the decision-making process of the ASB in making corn yield forecasts. In order to do so, the models in the articles incorporate a variety of auxiliary information, including trend yields, planting progress, July temperature and precipitation, and crop condition ratings, which presumably reflect variables actually used by the ASB in the estimation process. Another type of auxiliary information used by the ASB in recent years is remote-sensing satellite data (Adrian, 2012; Johnson, 2014), such as the Normalized Difference Vegetative Index (NDVI), a measure of biomass density.

In sum, NASS has an active research program to try to formalize and improve the ASB methodology (e.g., Adrian, 2012; Wang et al., 2011; Nandram, Berg, and Barboza, 2014; Cruze, 2015). This provides important clues about the types of non-survey information used by the ASB, but we still don’t have any information about the weights placed on this information in ASB deliberations. There is obviously some concern within NASS about the subjective weights placed on the survey and non-survey information given discussions found in the articles cited above. For example, Adrian (2012) notes that the emphasis placed on different information, “will inevitably vary from person to person and depend upon the composition of the Board.” Our view is that an element of subjective expert judgement will likely always be a necessary component of a process as complex and difficult as forecasting crop yields. We concur with the late Bruce Gardner, who made this trenchant observation after sitting through ASB lock-up deliberations for an early 1990s Crop Production report:

“A NASS board in Washington then assesses all the indicators of yield, including the estimates of a month earlier. This is not done using a pre-specified formula–in which case a computer could replace the NASS board–but through a consensus of the Board members based on their experience and the full information before them.” (Gardner, 1992, p. 1068)

ASB Track Record

When viewing the details of the ASB forecasting methodology, especially the magnitude of the bias in the AYS and OYS yield indications, it is easy to lose sight of the big picture. That is, the ASB is tasked with combining the AYS and OYS yield indications with other relevant information in order to make the best possible published estimates of corn yield, and it is the accuracy of the final published estimates that ultimately matters. So, we updated our earlier evaluation (farmdoc daily, August 29, 2014) of the historic accuracy of USDA published August forecasts of the U.S. average corn yield relative to the “final” yield estimate released in January (we say “final” because January estimates are sometimes revised based on the Agricultural Census conducted every five years). The differences between the forecasts and the final estimates in percentages over 1990–2015 are presented in Figure 2. When interpreting the errors, note that a positive error implies an under-estimate on the part of USDA and a negative error implies an over-estimate. The errors associated with the USDA corn yield forecasts are occasionally very large, such as 1993 and 1995. These examples of large errors are not surprising due to the unusual weather events that occurred in those years. It is interesting to note that USDA corn yield forecast errors in 2012 were extremely small, with the August forecast exactly equal to the final estimate, and thus, having a zero forecast error. This is surprising given the magnitude of drought conditions that prevailed in 2012 and the difficulty of forecasting corn yields under these circumstances. Accuracy was also exceptional in 2015, when the forecast error was only –0.2 percent. The plot suggests a clear downward trend in USDA corn forecast errors over time.

Forecast performance after 2011 has been particularly impressive.



It is important to emphasize that the USDA track record of forecasts evaluated here is based on “real-time” forecasts. In other words, this is the record of actual forecasts produced and released to the public over time. As Tetlock and Gardner (2015) observe in their best-selling book Superforecasting:

The Art and Science of Prediction, measurement and evaluation of a large sample of real-time quantitative forecasts is the only scientifically-valid way of determining true forecasting skill.

Recently, there has been a considerable media coverage of several new “big data” firms that claim to produce superior corn yield forecasts to that of the USDA (e.g., Brokaw, 2016; Woyke, 2016). What is not emphasized is that the evidence for these claims is based on historical simulations of model performance, or “backcasting,” a much lower and less rigorous hurdle. These firms may actually be able to beat the USDA, but real-time track records will be required to convincingly prove the point. Until then, the available evidence indicates it is hard to beat the accuracy of USDA corn yield forecasts.

Implications

The Agricultural Statistical Board (ASB) of the National Agricultural Statistics Service (NASS), is responsible for determining the official published corn yield estimates of the USDA. While there is considerable information available about the survey methodology used by NASS to generate yield indications, until recently, very little information has been publically available about the nature of the corn yield indications, the non-survey information, if any, used by the ASB to supplement the survey indications, or how the ASB reaches a collective consensus. Several publications have appeared in the scientific literature during the last several years that help open up the ASB “black box.” These publications present for the first time historical data on the separate Agricultural Yield Survey (AYS) and the Objective Yield Survey (OYS) corn yield indications and the results are striking. The upward bias in the OYS corn yield indications, regardless of the release month, varies from around 10 to 15 bushels per acre, while the downward bias in the AYS in August ranges from about 10 to 20 bushels, and then generally declines in September and October and is usually, but not always, fairly small in November. Given the level and variability of the bias in AYS and OYS yield indications, it is sensible for the ASB to seek out additional non-survey information when generating published yield estimates. The recent publications indicate that the ASB incorporates a variety of auxiliary information, including trend yields, planting progress, July temperature and precipitation, crop condition ratings, and satellite imagery data. Unfortunately, we still don’t have any information about the weights placed on this information in ASB deliberations. While it is important to better understand all aspects of the NASS corn yield forecasting methodology, and ASB procedures in particular, in the end what matters is the accuracy of the final published estimates.
On that score, the evidence suggests USDA corn yield forecasts are still hard to beat.

Extrapolating Yields from USDA's Crop Conditions



It’s about this time of year that USDA’s Crop Condition reports can be used, in part, to develop corn and soybean yields.

The agricultural economists at the University of Illinois have been tweaking yields out of the USDA crop conditions reports for quite some time. They say the later in the season it gets the more accurate they become. Right about now is usually when the good to excellent ratings, along with all the rest, begin to zero in on what’s really happening across America says Darrel Good, "We do know that the initial ratings for both crops are generally a bit on the high side. That is crops always look good early in the season before weather has had its chance to take a toll on the crop. And then on average ratings decline as you go to the final report of the year. If you recognized that bias, and correct the weekly observations for that bias the in-season ratings can be very useful because there is a very high correlation between final ratings and yields."

Typically, says Good, by mid-July the ratings for corn are pretty close. This is on average. That point is later in the season for soybeans, usually sometime in early August. Here are the yields the U of I has generated from this week’s USDA Weekly Crop Progress and Conditions report (July 30, 2017).
Darrel Good - If we relied entirely on the crop conditions model, today’s ratings would point to of 167.2, with soybeans at 47.7.
"If we relied entirely on the crop conditions model", says Good, "today’s ratings would point to of 167.2, with soybeans at 47.7. Again, I’m not sure I would ever rely one-hundred-percent on crop conditions as a way to form crop expectations, but as one component it does give you a good barometer or where we are."

One other note here on making calculations. A one percent move in the good and excellent category is worth about 7/10ths of a bushel says Darrel Good. This week corn is 15 points lower in those categories than last year when the national yield was 174.6. If you add in the trend line bump and do the math, it’s in that 166–167 range.

USDA June 30 Acreage & Grain Stocks Reports


download presentation (pdf)

USDA Acreage Report


USDA Grain Stocks



University of Illinois Updated Supply & Demand Tables
corn
soybean


mid-south farmers learned to raise better soybeans in the mid-1990's



see D.Good / T.Hubbs video above





U.S. Secretary of Agriculture Sonny Perdue | April 25, 2017

U.S. Secretary of Agriculture Sonny Perdue addresses USDA employees and guests shortly after being sworn in April 25, 2017.



“We want the public to feel as welcome and as home here (USDA Bldg) as they do in their own home.” - Sonny Perdue

“I view USDA worldwide as a family, and we are going to treat it as a family.” - Sonny Perdue

“I was a farmer first and we are going to get comfortable in working clothes.” Perdue sheds his coat and tie….

“We want to make decisions on facts and evidence. Good sound science.” “We want to be data-driven.” - Sonny Perdue



Anticipating the March 1 Soybean Stocks Estimate

USDA, at the end of this month, will let us know how much of the nation’s soybean crop there is left in the bin. It “should” be a fairly uneventful number.

by Todd Hubbs
read full farmdocDaily article

On March 31, the USDA will release the quarterly Grain Stocks report, with estimates of crop inventories as of March 1, and the annual Prospective Plantings report. For soybeans, the stocks estimate is typically overshadowed by the estimate of planting intentions. Usually, the quarterly stocks estimates for corn garners more interest because these reports reveal the pace of feed and residual use which is a large component of total corn consumption. The March 1 soybean stocks estimate this year may not provide much new information despite recent growth in marketing year ending stocks and concerns about the size of the South American crop… continue reading the full article by clicking here.

Generally, Todd Hubbs says it is pretty easy to figure out how many soybeans have been consumed. There is a regular reporting system for how many bushels are exported and one for how many are crushed. That second report, the crush, calculates how many soybeans are crushed in the United States into its two components. These are soybean meal and soybean oil. Hubbs, an agricultural economist at the University of Illinois, says the reports make it easy enough to calculate disappearance, consumption, usage, whatever you want to call, and consequently come up with a number that approximates how many bushels are left to use. Hubbs’ March 1 grain stocks figure for soybeans is 1.68 billion bushels. Here’s the math he used to get there.

Quote Summary - Exports for the first quarter were 932 million bushels. For the second quarter, I have them pegged at about 721 million bushels. I have the second quarter crush at 491 million bushels. This brings the total crush for the first half of the marketing year to 976 million bushels. We’ve been crushing a really good rate, but we have a lot of soybeans. So, with USDA raising ending stocks to 435 million, if that number holds and we don’t drive those numbers down, and if the March 1 stocks number is 1.68 billion, it means the last half of the marketing year we are going to have to consume about 1.23 billion bushels.

Hubbs thinks that is a reasonable number. It depends, though, he says mostly on what happens in the export market through August.


USDA January Reports | an interview with Todd Hubbs

University of Illinois commodity grains analysts Todd Hubbs discusses the January 12th USDA reports including Crop Production, Grain Stocks, and WASDE.








Assessing the Potential for Higher Corn Prices

The odds are against four dollar cash corn this year and next, at least for any extended period of time.

The monthly average cash price paid to farmers in the United States for their corn has been less than $4.00 a bushel for 27 consecutive months. It’s likely to stay that way well into 2017, too, says University of Illinois Agricultural Economist Darrel Good unless something changes, “Some combination of a reduction in corn supplies and increased consumption will be required in order for prices to move above $4.00 per bushel for an extended time.”

On the supply side, or how much corn is around, USDA’s next Crop Production report is due November 9th. It will contain a new forecast of the size of the 2016 U.S. corn crop. Previous history of yield forecast changes in November in years when the forecast declined in September and again in October as was the case this year, says Darrel Good, show very mixed results with 5 moving lower, 1 unchanged, and 4 of the ten getting bigger. The trade is leaning toward a smaller corn yield this time around. So, not a lot of supply side help expected from the USDA reports on this fall’s crop. That make the southern hemisphere pivotal.

Brazilian production declined from 3.35 billion bushels in 2015 to 2.64 billion bushels in 2016 due to late season drought. Early season USDA projections are for production in 2017 to rebound to 3.29 billion bushels. In addition, Argentina is expected to expand corn area due to reductions in export taxes.

It is too early in the South American growing season to assess yield potential, but production well below early projections would be required to push corn prices higher says Good in his Weekly Outlook on the Farm Doc Daily website. He also thinks a more likely source of a reduction in corn supply may be reduced corn acreage in the United States next year.

Darrel Good - Assuming a three million acre reduction in harvested acreage and consumption during the 2017–18 marketing year near the 14.525 billion bushels projected for this year, the 2017 average yield would need to be below 173 bushels in order for year-ending stocks to be reduced from the 2.32 billion bushels projected for the current year. Under the acreage and consumption assumptions made here, a yield near trend value of 169 bushels would result in year-ending stocks of about 1.99 billion bushels.

There are lot of supply side ifs in that statement. Maybe then demand for corn could be the key to higher prices. The good news here is that U.S. corn exports are up, but that’s based upon last year’s poor corn crop out of Brazil. It doesn’t appear feed usage will increase either, thinks Good, and while the ethanol grind has be increasing, USDA has already penciled in an extra 100 million bushels of usage.

It appears unlikely thinks Darrel Good that higher corn prices will be generated by a large reduction in the estimated size of the 2016 U.S. crop or stronger than projected demand for that corn. That leaves a smaller than expected South American crop or a much smaller U.S. crop in 2017 as the potential sources of higher prices. If South American production increases as projected, a large decline in U.S. acreage and/or a 2017 yield below trend value may be required to push the average corn price above $4.00 during the 2017–18 marketing year.

USDA October Reports



University of Illinois Agricultural Economist Darrel Good reviews the October 12, 2016 Crop Production and WASDE reports including his thoughts on how it changes off-farm storage decisions.

Not Much Chance USDA Will Change Corn Yield or Acreage

Early corn yield reports have been good, but pretty variable. There are more than few concerns about a disease called diplodia, too. Some are beginning to piece these items together to make a case for USDA to lower its corn yield estimate. This isn’t very likely thinks University of Illinois Agricultural Economist Darrel Good.

“The fact is”, says Darrel Good, “if you look at the last 20 years of history, there is a strong tendency of the corn yield estimate to get higher in January compared to what it was in September. This has happened 70% of the time in the last 20 years, and almost 70% of the time in the last 40 years. So, those looking for a lower estimate are bucking history, but you can’t rule it out.”

Maybe not, but even if the USDA yield changes it won’t be by much thinks Darrel Good. Certainly not enough to really alter the supply/demand balance sheet changing it from a surplus to a tight supply situation. He doesn’t expect USDA to change the acreage numbers much either. This is because the difference between the Farm Service Agency reported acreage figures released in August and then again in September was very small.

This tells Darrel Good reporting has occurred in a very timely fashion. Therefore, he doesn’t look for an FSA increase in subsequent reports. Historically when the dust settles on corn, NASS acreage is three to three-and-a-half percent higher than FSA, says the U of I number cruncher, and about two percent higher on soybeans. This is right in the range where the FSA numbers set today.

Consequently, Darrel Good does not expect NASS to change its corn acreage estimate very much going forward. If this is the case, it leaves the U.S. with record corn yield and production figures.

Why USDA's Ear Weight is Unlikely to Change



June 17 | USDA NASS Weekly Crop Progress Report





Statistical Methodology
via USDA NASS

Weekly Crop Progress Report Survey Procedures: Crop progress and condition estimates are based on survey data collected each week from early April through the end of November. The non-probability crop progress and condition surveys include input from approximately 4,000 respondents whose occupations provide them opportunities to make visual observations and frequently bring them in contact with farmers in their counties. Based on standard definitions, these respondents subjectively estimate the progress of crops through various stages of development, as well as the progress of producer activities. They also provide subjective evaluations of crop conditions.

Most respondents complete their questionnaires on Friday or early Monday morning and submit them to the National Agricultural Statistics Service (NASS) Field Offices in their States by mail, telephone, fax, e-mail, or through a secured internet website. A small number of reports are completed on Thursday, Saturday, and Sunday. Regardless of when questionnaires are completed, respondents are asked to report for the entire week ending on Sunday. For reports submitted prior to the Sunday reference date, a degree of uncertainty is introduced by projections for weekend changes in progress and condition. By the end of the 2015 season, over 90 percent of the data were being submitted through the internet website. As a result, the majority of all data are submitted on Monday morning, significantly reducing projection uncertainty.

Respondents are sent written reporting instructions at the beginning of each season and are contacted periodically to ensure proper reporting. Terms and definitions of crop stages and condition categories used as reporting guidelines are available on the NASS website at www.nass.usda.gov/Publications/National_Crop_Progress.

Estimating Procedures: Reported data are reviewed for reasonableness and consistency by comparing with data reported the previous week and data reported in surrounding counties for the current week. Field Offices summarize the reported data to district and State levels, weighting each county’s reported data by NASS county acreage estimates. Summarized indications are compared with previous week estimates, and progress items are compared with earlier stages of development and historical averages to ensure reasonableness. Weather events and respondent comments are also taken into consideration. State estimates are submitted to the Agricultural Statistics Board (ASB) along with supporting comments, where they are compared with surrounding States and compiled into a National level summary by weighting each State by its acreage estimates.

Revision Policy: Progress and condition estimates in the Crop Progress report are released after 4:00 pm ET on the first business day of the week. These estimates are subject to revision the following week.

Soybean Stocks, Acreage, and Weather

The price of soybeans has rallied so much this season that one agricultural economist is doubtful there is much additional upside potential.

New crop soybeans are worth about two-and-half dollars more today than back in February when farmers purchased insurance to cover the price risk inherent in farming. The rise has to do with a short crop from South America, above average temperatures in the United States, and only scattered rainfall in the mid-section of the nation. Farmers can now sell beans for about $11 a bushel for fall delivery, and that doesn’t seem too bad to University of Illinois agricultural economist Darrel Good.

Quote Summary - While there is a potential for prices to move even higher with stressful summer weather, that potential may be less than the potential for corn, depending on the magnitude of planted acres, since soybean prices have already experienced a sharp rally and soybean yields are less sensitive to summer weather than are corn yields.

The path soybeans have taken to higher prices is pretty clear. The July contract at the CME Group in Chicago is up 25% since April 1, 2016. The rally came as the market came to grips with a 200 million bushel reduction in the estimated size of the combined Argentine and Brazilian soybean crops and the resulting surge in export demand for U.S. soybeans. The next stop on this price train forward is the end of month reports from the United States Department of Agriculture. USDA will release the Acreage and Grain Stocks reports June 30th. Darrel Good calculates the expected June 1 Grain Stocks for soybeans near 842 million bushels.


Soybean Inventory Estimate
(in billion bushels)

1.531 March 1, 2016 Inventory
+ .006 Imports
- .173 Exports
- .487 Crush
- .035 Feed & Residual

0.842 June 1, 2016 Inventory


He believes there is room for a surprise in the Acreage Report. USDA’s survey of farmers in March put expectations at 82.236 million acres. This number could be higher for a couple of reasons. The consensus seems to be that the June Acreage report will reveal that acreage exceeded intentions due to some switching of intended corn acreage to soybeans as the result of the increase in soybean prices relative to corn prices since March and the delayed corn planting in parts of the eastern Corn Belt.

Soybean acreage may also exceed intentions, writes Darrel Good on the FarmDocDaily website, as a result of total acreage of spring planted crops exceeding intentions reported in March.

Soybeans, the Switch is On

Ever since USDA released the Prospective Plantings report March 31st, many have been wondering if farmers will decide to switch a few corn acres to soybeans. The higher price of that crop seems to make this more likely.



Farmers told USDA in March they would plant about 82.2 million acres of soybeans this season. This is one percent less than last year, and a million acres or so less than the trade had really expected. Prices have rallied since then and University of Illinois Agricultural Economist Darrel Good thinks that million acres could be back in play, but that it won’t really change much, "I tend to think there will be some modest switching given the price reaction we’ve had since that report was released. Soybeans are considerably stronger than when the survey was done and corn prices are steady to weaker than when farmers were surveyed. I wouldn’t be surprised to see up to a million acres, perhaps, move away from corn to soybeans or perhaps some other crops. Again, a million acres doesn’t alter the supply expectation very much".

However, very much, can result in a pretty good rally. Darrel Good and colleague Scott Irwin at ILLINOIS put together a supply and demand table for this year. They added 800,000 planted acres to soybeans, putting the figure at 83 million even. The two project this could result in a 267 million bushel ending stocks number with an average cash price of $9.45 a bushel for the year. USDA season’s average cash price for soybeans for the 2015 crop is $8.75. It’s important to note that while the ILLINOIS projection uses a larger planted acreage figure, it also includes a much lower average yield. Good says there are two reasons for this.
Quote Summary - Our calculated trend yields for both corn and soybeans would be a little less the USDA. So, we start a little lower than they start. And then we monitor the El Niño episode that tends to be fading pretty quickly right now. This suggests to us an elevated risk of below trend yields this year. We start with a lower trend yield on corn, 166.2, and I would want to fade that three or four bushels in my expectations right now. We’d start at 45.2 bushels on soybeans and fade that bushel or so based on the El Niño.
Actually, the projection is down 1.2 bushels to the acre for a projected nationwide average yield of 44.

University of Illinois 16/17 Soybean Balance Sheet Projection - April 13, 2016
USDA will release its first projection of the current growing season supply and demand tables May 10th. Those numbers most assuredly will not yet update acreage, nor are they likely to include a deviation from trend line based on summer weather predictions.

USDA March 31 Report Day React - interview with Darrel Good



Prospective Plantings












Grain Stocks

Targeting the Middle of the Chain

Secretary Vilsack has identified strengthening local and regional food systems as one of the four pillars of USDA’s commitment to rural economic development. Part of this focus in on the middle of the supply chain. Todd Gleason reports USDA is helping to make investments in this space.