SOYBEAN/CORN ANALYSIS : U.S. corn and soybean yields are the first two numbers that traders will seek on Friday, but the upcoming government production forecasts add an extra layer of uncertainty with possible updates to acreage.
Aside from U.S. crops, grain exports from Ukraine’s seaports are slowly resuming and Europe is amid a widespread drought, giving traders extra items to watch for when the U.S. Department of Agriculture publishes its next reports on Friday at noon EDT (1600 GMT).
USDA’s August yield estimates are no better than August trade guesses when it comes to final yields, but the market will trade the agency’s numbers on Friday, subjecting Chicago futures to large corrections if analysts miss as they frequently do.
CBOT futures generally move with the U.S. yield trade biases on August report day, and analysts’ recent tendency to underestimate yields has led to some decisive shifts, including a 6% drop in corn futures in 2019 and a 5% loss in 2015.
Price plunges can be avoided despite a bearish yield if ongoing crop concerns are sufficient to warrant dismissal of the forecast. That was very prominent in 2020 when futures rallied off a massive August corn yield since the outlook did not incorporate possible derecho damage that occurred two days earlier.
Traders have yet to commit to a selloff in CBOT corn and soybeans this summer because of frequent hot and dry weather across the Corn Belt. That pattern is expected to continue in the near term, particularly in the West, but it might not be extreme enough for futures to survive a bearish number on Friday.
It is also possible that a bullish result fails to produce a rally, which recently happened to soybeans, though this often stems from macro-market events unrelated to U.S. production.
Significant planting delays prompted USDA’s statistics service (NASS) to resurvey acreage in the Dakotas and Minnesota, and those results will factor in to Friday’s numbers.
Analysts appear to have mostly embraced the lower U.S. soybean acreage scenario that shocked on June 30 despite chatter at the time that USDA’s resurvey would probably add back a bunch of acres. That notion played in to CBOT soybeans’ inability to rally that day despite a ragingly bullish area.
On average, the trade pegs harvested soybean acres at 87.7 million, which implies planting assumptions around 88.6 million acres versus 88.3 million reported on June 30. Ahead of the last report, analysts were looking for 90.4 million planted soybean acres with a low of 88.7 million, so they have basically scrapped previous ideas.
Only two of the 19 analyst estimates imply soybean plantings above 89 million acres with a high of 89.7 million. Just one of 19 thinks harvested soybean acres come in lower than June.
Corn acres were as expected on June 30, and analysts see harvested area slightly lower at 81.8 million acres versus 81.9 million previously. Only two of 19 analysts think the resurvey will result in a higher corn area.
The Ukraine export deal has been signed since USDA’s last update, so the agency could raise 2022-23 Ukraine corn and wheat export outlooks, last at 9 million and 10 million tonnes, respectively. USDA’s latest view on Ukraine’s total grain crop is also lighter than some industry ideas. read more
About 1.7 million tonnes of Ukrainian grain were shipped in July compared with previous monthly maximums in excess of 5 million tonnes. read more The U.N. believes 2 million-5 million tonnes per month is eventually possible, though early efforts are slower as just 370,000 tonnes of grain have left Ukraine’s seaports since Aug. 1. read more
Top European grain producer France is amid its worst drought in history, though USDA’s latest corn yield target is in line with recent averages. read more France’s agriculture ministry last week pegged the corn crop down 19% on the year to 12.7 million tonnes.
Heat waves have been a problem in other parts of Europe this year, including in exporter Romania, where the wheat harvest was up to 18% smaller than last year. At the European Union level, both USDA’s corn and wheat yields match recent averages.
USDA’s 81.5 million tonnes for Russia’s wheat crop is far below some other recent estimates. Consultancy IKAR on Monday placed the crop at 95 million tonnes versus 90.5 million a month earlier, which is well above the top exporter’s record harvest from two years ago of 85.4 million tonnes.
The origin of such a large discrepancy in estimates is unclear, which raises questions of whether recently claimed areas of Ukraine are being included in some of the heavy forecasts.