Spotlight on USDA crop report, then weather

August 9, 2009

illinois-soybeansThe U.S. government’s long-awaited crop report on Wednesday will give world grain traders their first indications from field surveys of expected final yields.
With the United States providing more than a third of the world’s soybean exports and more than half of its corn exports, the U.S. Agriculture Department’s August report always grabs headlines. Until now, historical yield averages have been used to project likely harvests based on planted acreage.
Still, this particular August report may be trickier to interpret than usual, because corn and soybeans remain immature for this time of year given rain-delayed spring plantings and the unseasonably cool growing season so far in the Midwest. States across the Corn Belt from Ohio to Nebraska have seen their chilliest July in more than 100 years. 
Ordinarily, that might mean big yields, especially for corn which pollinates in July. As of Aug. 2, only 14 percent of corn was “doughing” after pollination, versus the five-year average pace of 29 percent, according to USDA weekly reports. For soybeans, August weather is usually key to yields as the crop sets and fills pods this month. As of Aug. 2, only 36 percent of beans had set pods compared with the 54 percent average.
Another twist for grain analysts will be a special survey of corn and sorghum acres taken in July that USDA has promised to examine “variable weather conditions” in key growing areas. 
“USDA’s crop report on the 12th will be a direction finder, anticipating what USDA has up its sleeve not only on acreage change for corn and sorghum,” said Joe Victor, analyst at  Allendale Inc. “You can not rule out the possibility that USDA might have some minor changes for soybean acres.” 
On average, grain analysts expect the government to cut its current planted corn area of 87 million acres by roughly a million acres. But given July Midwest weather they also expect USDA to boost corn production by 4 bushels per acre from its current yield estimate of 153.4 bpa. USDA already is forecasting the U.S. production at 12.29 billions bushels, the second largest on record after 2007′s 13.04 billion, and a record 3.26 billion bushel soy crop.
The August report is always key for grain production estimates. But demand, especially for soybeans, will also continue to draw huge interest. Analysts will watch for USDA’s soybean demand forecast, any fresh soybean purchases by China and changes in the bottom line: end-season stockpiles.
“U.S. soybeans and U.S. products are priced by far and away the most competitive on the world market, priced significantly better than Argentina and Brazil,” said grain market analyst Terry Roggensack of The Hightower Report.
Weakness in the dollar is part of the attraction for foreign buyers. But Brazil and Argentina, the second and third largest soy exporters, also now have limited supplies left. 
Weather — not just in the U.S. but India — will be key for the markets before and after the USDA Wednesday data. Traders are getting edgy about scattered dry pockets in the northern Midwest, wondering if pod-filling soybeans will be hurt. But the grain belt is also supposed to finally heat up — just what corn needs now to boost maturation.
In India, crops are suffering from low monsoon rains.
“The initial impact of the bad monsoons has been mostly on sugar and rice,” Roggensack said. “The market’s focus now is … ‘What if the Indian soybean and groundnut crops are significantly damaged?’” 
“India is the biggest edible oil importer in the world,” he said. “If its yields are 15 percent, you’re talking about a huge impact on the world’s oilseed and vegetable oil market.”

PHOTO: Illinois soybean field taken by Chris Stebbins on Aug. 2.

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