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September 2021
Sometimes expectations are met
The September updates for USDA’s Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports were highly anticipated this year. There were several reasons for that anticipation, as these reports would incorporate the first round from the objective crop yield surveys for corn and soybeans (where USDA representatives physically examine the crops) and would also incorporate the acreage data gathered by the USDA Farm Service Agency (FSA) (a month earlier than usual). Add in the uncertainty created by weather events, including the ongoing drought and the impacts of a few tropical storms, and the stage was set for potential volatile reports. However, in the end, the reports mostly reflected and returned the pre-trade expectations, providing a salve to downward-trending markets. While there remains some uncertainty on the supply side (the effects of Hurricane Ida were not fully worked into the estimates), the September updates revealed the crops will be large, but usage remains strong as well.
Let’s start with crop acreage. In the week leading up to the reports, it was announced that USDA National Agricultural Statistics Service (NASS) would incorporate information from the FSA acreage data released in late August to potentially update their crop acreage figures. Normally, these adjustments are made in October. The early move created some chatter within the trade. However, once the acreage adjustments were made, the production estimates for both crops landed squarely in the middle of trade expectations. For corn, national planted area was increased on 612,000 acres to a total of 93.3 million. This moved the estimate for national harvested (for grain) area to just over 85 million acres. While most of the state adjustments were rather small, there were some big shifts. Corn plantings in Illinois, Iowa and Minnesota were reduced by 200,000 acres each. Kansas corn shrank by 100,000 acres. Those losses were more than offsets by gains in Arkansas (100,000), Missouri (300,000), Nebraska (200,000), North Dakota (500,000) and South Dakota (100,000).
Some of those corn acreage shifts show back up again in the soybean area. Nationally, total planted area for soybeans was reduced by 320,000 acres, to 87.235 million acres. So the national acreage shift was smaller, but the number of states involved was higher. Iowa and Nebraska added 200,000 acres each. Indiana added 250,000 acres. North Dakota increased by 100,000 acres. But those gains were offset by declines in Illinois (100,000), Kansas (150,000), Michigan (150,000), Missouri (200,000), Tennessee (150,000), and Wisconsin (100,000).
The next piece to the supply puzzle is the yield. The September yield estimates are a combination of the data from USDA’s objective yield survey and the simultaneous farmer yield survey. Figure 1 shows the current yield estimates and how they have changed. The national average corn yield estimate rose 1.7 bushels to 176.3 bushels per acre. The pattern of yields across the country remained consistent with earlier estimates, with record yields projected in the eastern Corn Belt and lower yields in the west. However, the September update revealed slightly better corn crops across most of the nation. Iowa’s corn yield estimate increased by five bushels to 198 bushels per acre. Wisconsin’s corn yield rose by five; Minnesota’s went up by eight. North Dakota and Nebraska each increased by two bushels. Putting together the acreage and yield updates, USDA found evidence to support a 15 billion bushel corn production projection. So we are back to talking about the potential for a record corn crop.
Like the acreage comparison, the yield adjustments for soybeans were smaller on a national scale, but more varied at the state level. The national average soybean yield estimate came in at 50.6 bushels per acre, up 0.6 bushels. The general pattern remains for record crops in the east and drought-stressed crops in the west. Iowa’s soybean yield estimate increased by a bushel to 59 bushels per acre. Kentucky, Missouri, North Dakota and Virginia gained a bushel as well. Minnesota and Louisiana were the big gainers, with Minnesota up four bushels and Louisiana up three. However, the soybean crops from South Dakota to Kansas, in Texas, and in the Northeast shrank a bit. Overall, national soybean production is projected at 4.374 billion bushels, which would be the third largest, trailing only the 2017 and 2018 crops.
The usage side of the ledger was also updated in these reports. The main storyline was a slight pullback in old crop usage and a slightly bigger boost to new crop usage. For corn, the recent slowdown in ethanol production translated into a 40 million decline in corn grind out of the 2020 crop. Export sales out of the 2020 crop were reduced by 30 million bushels as well. With the 70 million bushels added back to stocks, the 2020-21 corn ending stocks are projected at 1.187 billion bushels. But the increase in stocks didn’t impact the 2020-21 season-average price estimate, as it increased five cents to $4.45 per bushel. This shows that USDA is factoring in more sales from earlier in the marketing year. For the new (2021) crop, feed and residual usage was increased by 75 million bushels and exports were boosted by 75 million. However, given the increase in stocks and the higher production projection, 2021-22 ending stocks are now set at 1.408 billion bushels, up 166 million from last month. The 2021-22 season-average price estimate fell 30 cents to $5.45 per bushel.
For soybeans, the usage adjustments reduced domestic consumption, but increased international sales. For the 2020 crop, domestic crush was reduced by 15 million bushels, mainly being driven by the need (or smaller lack thereof) for soybean meal. That change boosts the 2020-21 ending stocks to 175 million bushels, which indicates soybeans are still in a very tight market. The 2020-21 season-average price estimate is steady at $10.90 per bushel. For the 2021 crop, that reduction in domestic crush is extended, taking away another 25 million bushels as we look forward. However, the positive change in export sales, increased by 35 million bushels, offsets that loss. Factoring back in the production increase, 2021-22 ending stocks are projected at 185 million bushels, up 30 million from last month. And the 2021-22 season-average price estimate fell 80 cents to $12.90 per bushel.
Over the past couple of weeks, traders had been preparing for these reports, with the results being a lowering of prices. With many of the adjustments coming in near trade expectations, the price reaction to the reports was mild at first, with little movement in prices. But as the day wore on, corn and soybean prices rose. With each passing report, the supply uncertainty diminishes and the relative importance of usage expectations grows. For both crops, those usage expectations moved higher. Most of that growth is once again focused on the international markets. While USDA still sees smaller numbers of bushels moving through exports over the next year, the gaps from the 2020 records look to be smaller than first anticipated. Continued strong export sales during harvest and the winter months will be key to maintaining positive price momentum. The seasonal patterns for corn and soybean prices show we should be near the lowest prices for the year. Export sales will determine if that holds true this year.
For more details on the impact of these reports, view the latest Ag Outlook Presentation video.
Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu
