Despite Declining Ratings, Big Corn & Bean Crops Stun Markets

Market Analysis

The USDA’s August corn & soybean forecasts revealed surprisingly high yields vs. trade’s averages causing an-other sharp price break across the markets this year. With recent crop ratings declining from very high initial levels, many trade estimates had slipped recently. However, the USDA’s initial crop projections are for a record US corn yield and 2nd highest soybean yield for the 2018 growing season with 4-6 weeks left in many parts of the Midwest.

August’s 4.4 bu. higher corn yield from July and a 2.2 bu. larger level of 178.4 bu. then the trade was a surprise. This higher yield produced a 356 million bu. a larger crop of 14.586 billion bu. However, 2018’s August US corn production had the smallest difference (175 million bu.) vs. trade’s average of over 350 million bu. from 2015 -17. The biggest regional increase occurred in the ECB (up 4.2 bu. to 190 bu. while higher NE, SD and ND yields advance the WCB by 3.7 bu. to 185.1 bu. while lower yields in South and the East decrease the national average. Interestingly, the USDA’s increased both its feed (+100 million) and export (125 million bu.) 2018/19 demands this month because of their lower price and EU’s drought. Overall, the upcoming year’s actual stocks and stocks to use ratio will the lowest for corn since 2013/14.

The USDA also advanced its August US soybean yield sharply (2.0 bu.) & crop size (180 million bu.) vs. the trade’s average estimates. 2018’s Midwest yields are expected to bounce back while the Delta and SE’s yields may slip slightly. However, 2018’s August level of 4.586 billion bu. is the largest crop ever. Even with 35 million in higher old and new-crop demand, 2018/19’s stocks are expected to rise 785 million bu, an all-time high.

Despite no change in 2018’s US spring wheat crop size after the recent modest crop tour yield level, the USDA’s 1.9 mmt smaller world stocks (reduce usage vs 7.5 mmt smaller EU crop) was a bigger surprise for wheat.