USDA’s unexpected corn yield hike shakes market

CHARLOTTE, Mich. — Ahead of the crop production estimates report, trade pundits expected a reduction in the U.S. corn yield average, but the U.S. Department of Agriculture thought differently.

USDA projected the nation’s corn yield to average 181.2 bushels per acre, a 2.7-bushel increase from last month.

This was USDA’s second bearish surprise for the corn market in the last 10 days going back to the Sept. 30 quarterly grain stocks report with higher-than-expected year-end supplies.

Karl Setzer and Angie Setzer of Consus Ag Consulting looked at the USDA’s latest prediction in a live webcast as the data rolled out.

Why did the trade miss the yield by so much? Will this production number hold?

Angie Setzer: Corn carryout came in at 1.849 billion bushels. That’s over the average trade guess by about 150 million. Production was up to 16.034 billion from 15.8 million last month.

Acreage was unchanged and yield came in at 181.2, up from 178.5 in September. The average trade estimate was 177.7 bushels per acre.

National Agricultural Statistics Service is back with a big old corn crop number for you with a yield of 181.2 bushels per acre, which is really interesting considering what we’ve been hearing anecdotally from early harvested stuff, but it is what it is.

They adjusted demand up a little bit, but not enough to cover it. Traders were expecting a 1.67 billion bushels corn carryout number, and USDA came in at a 1.849 billion. So, that’s substantially higher than what folks were expecting.

Karl Setzer: It is what it is, but it’s what the USDA put out. It seems a little premature to jump a yield like that when you’re barely into the crop and not getting that great of results coming in.

Angie Setzer: We have all of these conversations about improving this USDA stuff and not having these wide whipsaws and everything like that, and it just gets worse.

We’ve got to figure something out there with them. We trade it, we do whatever, but it will be interesting to see what the January number says.

Cash will be the biggest thing now, and maybe paying attention to what spreads do. Corn harvest is rolling.

If we have a 16 billion bushel corn crop coming at us with 2 billion left over, we should see more carry built into this corn market pretty significantly here as corn harvest starts. That’ll be something that I’ll be watching pretty closely.

Soybeans have kind of spread out a little bit as harvest has started, so that will be something I’ll be paying attention to.

Of course, we’ll be watching basis. Eastern Corn Belt basis has been firming over the last week, which is also something that has my eyebrow raised just a little bit.

Were USDA’s projections in the soybean and wheat supply and demand sheets, as well as for soybean production, as shocking?

Angie Setzer: On the soybean side, they bumped yield up as well to 53.1 bushels per acre. The trade expected 52.8, and production came in about 5 million above expectations.

The area harvested was unchanged at 85.9 million acres. Beginning stocks are at 315 million bushels with the adjustment from the quarterly stocks last month.

Crushings were left unchanged. Exports are up 10 millions bushel. Carryout is at 315 million bushels and on-farm average price was unchanged at $12 per bushels.

Wheat stocks came in at 740 million bushels, up 23 million. USDA lowered wheat exports 25 million bushels. That’s not surprising.

They did bump seed and residual up by 10 million, left seed unchanged, left food unchanged and bumped imports up by 5 million.

Were there any major adjustments in the global crop balance sheet?

Karl Setzer: The Brazil soybean crop was left at 186 million metric tons. There was little change in the world soybean ending stocks at 124.28 million metric tons, about 1 million higher than expected. So, we didn’t see much of an alteration there.

There was really little change in the world wheat ending stocks, as well, at 276.04 million metric tons. We were 276.3 million last month. The trader expected 276.63 million in global wheat carryout.

Corn, though, was at 280.4 million tons versus 272.1 million last month, an 8 million metric ton jump. Seven million of that is the U.S. The trade expected 273.78 million corn carryout.

Angie Setzer: Ukraine corn was unchanged, Brazil, Russia, all of it, were unchanged. They basically phoned in the rest of the corn numbers.

The European Union’s corn production was lowered from 50.6 million metric tons to 48 million, and imports were unchanged, and just lowered domestic feed use slightly. USDA basically left a lot of the world numbers unchanged for corn but the U.S.

Karl Setzer: We trade this the rest of the session and we’ll probably see a little more on the geopolitical side, and then it’s back to U.S. harvest and South American planting.