Food Business News - August 22, 2017 - 32
he U.S. Department of Agriculture surprised the markets on
Aug. 10 with corn, soybean and
most wheat production forecasts above
trade expectations. Futures turned
sharply lower after the report and
mostly have struggled to fi nd reasons to
trade higher ever since. But as is typical
after a major U.S.D.A. surprise, there
are doubts about whether the U.S.D.A.
forecasts will come to fruition or if the
weather will trim yields, especially for
corn and soybeans.
The U.S.D.A. in its Aug. 10 Crop
Production report forecast 2017 U.S.
production of corn at 14,153 million bus,
down 7% from 2016 but still the third
highest on record and 2% above the
average of trade expectations. Soybean
production was forecast at a record 4,381
million bus, up 2% from 2016 and 4%
above the trade average. All wheat production was forecast at 1,739 million bus,
down 1% from July and down 25% from
2016 but 1.5% above the trade forecast.
Winter wheat production was forecast
at 1,287 million bus, up 1% from July but
down 23% from last year but still about
1% above the trade forecast. Production
of spring wheat other than durum was
forecast at 402 million bus, down 5%
from July and down 25% from 2016 but
2% above the trade average. Durum outturn was forecast at 51 million bus, down
12% from July, down 51% from 2016 and
12% below the trade average.
While the U.S. wheat production
forecasts were less bearish than the
corn and soybean numbers, the U.S.D.A.
boosted its 2017-18 global wheat production forecast by about 1% and raised
ending stocks about 2%, which means
U.S. wheat will continue to struggle for
a share of export markets. Both global
Food Business News
©JASON LEE - STOCK.ADOBE.COM
U.S.D.A. crop forecasts
corn and soybean production and ending
stocks forecasts were down from July.
The data jolted wheat, corn and soybean futures. Kansas City and Chicago
winter wheat contracts (September) lost
all of the run-up to contract highs set
July 5 and hit contract lows at mid-week
last week. Minneapolis spring wheat
(September) lost much of its run-up but
was 4% above the trade average.
"The poor crop condition reports
and significant weather issues in many
areas leads many market observers to
conclude the (corn) yield to be too high,"
said Todd Hubbs, University of Illinois
agricultural economist, in his Weekly
Outlook. "There appears to be a possibility of U.S. average corn and soybean
Wheat and corn futures prices
held above contract lows. The December corn future was only about a nickel
above its contract low, dropping about
50c a bu, or 12% from its July 11 high.
Soybean futures fared only slightly
better, with the November contract
dropping about $1.20, or 11%, from its
high on July 11.
With winter wheat harvest completed and spring wheat harvest advancing
quickly, most focus of crop analysts will
be on corn and soybeans for the rest of
the growing season, with an eye on the
weather and its impact on yields. The
U.S.D.A. forecast the average corn yield
in 2017 at 169.5 bus an acre, down 5.1 bus,
or 3%, from a record 174.6 bus an acre last
year but 2% above the trade average forecast. The U.S.D.A. soybean yield forecast
of 49.4 bus an acre was down 2.7 bus, or
5%, from 52.1 bus an acre last year but
yield forecasts to decrease. For soybeans
in particular, August weather will be a
A major weather concern remains in
Iowa, the nation's largest corn and soybean producing state, according to the
U.S. Drought Monitor. More than half of
the state, mainly the southwestern half,
is abnormally dry with pockets of severe
drought, as is about half of Nebraska and
most of South Dakota, while drought
remains extreme to exceptional in most
of the western half of North Dakota.
Whether moisture shortages in those areas are enough to reduce average yields
for the entire nation remain to be seen,
with a clearer picture hoped for in the
U.S.D.A.'s September crop report. FBN
August 22, 2017