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Yields to take center stage in August WASDE

Getty/iStockphoto Corn harvest in autumn
Harvested, prevent plant acres also to be updated in Friday’s reports

In case you haven’t noticed the headlines on the Farm Futures website over the past couple weeks, market watchers are more anxious about the market impacts of tomorrow’s World Agricultural Supply and Demand Estimates report than they have been since at least the March 31 Prospective Plantings report.

And there is good reason for the anticipation. Markets seem to finally be settling down following Russia’s February 2022 invasion of Ukraine, some inflation concerns are easing, and crops are beginning to approach the final stages of maturation.

But the market volatility paired with highly variable growing conditions for producers this summer is making predicting USDA’s yields a challenging task ahead of tomorrow’s reports. Here is our best estimation of what can be expected in tomorrow’s reports.

As always, our team will be covering USDA’s report release live. Stay tuned to and our social platforms for the latest insights and analysis after USDA releases the data at 11 a.m. CDT.

For more insights about USDA-National Agricultural Statistics Service’s farmer survey findings and the World Ag Outlook Board’s global production and usage calculations, follow NASS’s YouTube channel to watch the Agricultural Statistics Board Briefing also at 11 a.m. CDT. In this virtual live stream, the statisticians and economists who put together the monthly USDA reports brief Secretary Vilsack on the latest data updates.

Yield forecasts

081122 corn and soybean production.JPG

The August WASDE is important because it is the first time in the growing season that NASS will release yield estimates to reflect current crop conditions, calculated from a farmer survey distributed in July 2022.

Pre-report analyst estimates vary, between 173.2 bushels per acre and 177.6 bpa for corn and 49.9 bpa – 52.5 bpa for soybeans with average estimates of 175.9 bpa for corn and 51.1 bpa for soybeans. The trade is largely convinced that the slow and cold start to the growing season paired with pockets of heat damage is likely going to result in yields below the 2021 season (177.0 bpa for corn, 51.5 bpa for soybeans).

That would mean tighter stocks following several years of shrinking supplies. If USDA’s results shake out similarly to the trade estimates, growers can expect for a bullish floor to remain under prices. But that isn’t a guarantee in 2022.

The results from our August 2022 Farm Futures reader survey found that growers are more optimistic about soybean yields than corn, estimating 52.5 bpa for tomorrow’s soybean reading and 174.8 bpa for corn.

The soybean estimate is a considerable deviation from the other trade guesses and is the only one that is higher than the 2021 record of 51.5 bpa. It also presents a starkly different narrative than the markets have been discussing lately – a conversation that revolves around heat-induced yield losses. Farmers talked a big game about being pessimistic about yields in the survey, with 26% expecting USDA to decrease 2022 soybean yields by 2 to 3 bpa compared to last year’s yield.

However, another 23% are not expecting any national soybean yield changes in tomorrow’s report. And the high yield forecast should be a warning that soybean yields could surprise growers and markets tomorrow, potentially ushering in bearish price sentiment to the soybean complex.

Farm Futures’ corn yield forecast is considerably more conservative relative to beans. With 28% of growers expecting USDA to cut 2-3 bpa from 2021 corn yields in tomorrow’s report, it came as a little surprise that the survey’s corn yield estimate calculated out to 174.8 bpa.

When the rubber hits the road, it appears that farmers expect to suffer more losses on their corn crops this year than soybeans, especially in contrast to beans. While many areas received timely rains during corn pollination, persistent drought in the Western Corn Belt could inflict enough losses on the national scale to offset favorable yields further East. And it is not yet known how the next week’s forecast will bode for soybeans currently filling pods.

It’s worth noting that several growers admitted to struggling to answer the yield question in the Farm Futures August 2022 survey. They confessed that because of late-planted crops, it was still too early to make a guess on yields with any degree of certainty.

USDA will issue another yield forecast in the October 2022 Crop Production and WASDE reports that will feature another farmer-surveyed calculation. If the impending heat wave expected to bake the Upper Midwest over the next week holds true to forecasts, we could see further yield changes – and market volatility – through the next couple months.

Acreage forecasts

In its June 30 Acreage report, USDA-NASS noted that the planting delays in North Dakota, South Dakota and Minnesota would lead the organization to resurvey farmers in July for more reliable acreage estimates.

The trade estimates suggest that some acreage is likely to shift from corn into soybeans (approx. 100K acres). But the analysts are also forecasting soybean acres could receive another 100K acres on top of the gains from corn from other late-season rotation swings in the Upper Midwest.

That is not the only acreage-related datapoint USDA will be releasing tomorrow. USDA’s Farm Service Agency will release its first look at 2022 prevent plant acreage an hour after the WASDE and Crop Production reports are released.

The aforementioned planting delays in the Upper Midwest are likely to account for the lion’s share of the prevent plant acreage expected in the report. Prevent plant acres are likely to be higher than in 2021, but it is not yet certain how it will compare to 2020 acreage when another cold and wet start to the season diverted acres away from farmers’ original plans.

Forecasting USDA

All told, production estimates are forecast to remain unchanged for soybeans but trend over 100 million bushels lower for corn. Corn prices seem destined to ride out the bulls in tomorrow’s report while soybeans are at growing risk of a bear attack.

As I’ve noted in both my survey findings and previous E-corn-omics columns, there is typically more variability in USDA’s corn yield estimate in August relative to the soybean guess. Since 2000, the August USDA corn yield has eventually been revised higher 12 out of the last 22 years, or 55% of the time. There can be a little more certainty with soybean projections. In the past 22 years, USDA has only revised final soybean yields higher 8 times (36%) following the August yield report.

Plus, corn revisions tend to be larger than those of soybeans, which is due in part to corn’s innately higher yields than soybeans. Since 2000, August to January corn yield revisions have averaged 4.5 bpa while soybean changes only average 2.0 bpa.

Naomi Blohm reminds readers in the latest Ag Marketing IQ column that the August WASDE is slightly more likely to have bearish impacts on new crop prices, but with this report, “there is no smoking gun you can rely on. You can’t outguess these USDA reports, nor how the market will react, so be ready for anything by incorporating strategic marketing on your priced and unpriced bushels.”

And remember – outside money could also play a significant role in tomorrow’s reports. Hedge fund managers have largely exited the corn and soybean complex in recent months, but a futures rally in tomorrow’s report could reverse that trend. Easing inflation is another threat money managers hold over the commodity markets, which should remind growers that ag prices are still intertwined with the broader economy and that any economic disruption that increases inflationary pressures could also benefit farmers.

At the same time, the easing inflation pressures could keep weakening the dollar, which bodes well for export prospects as peak wheat export season begins to taper down and peak soybean export season ramps up.

Domestic demand adjustments favor exports

U.S. Ending stocks

A lot of these potential revisions will rely heavily on any changes made to 2022 production forecasts. Exports seems to be the usage category most likely easily adjusted by WAOB, so expect to see supply revisions trickle down to that demand class across all three major commodities.

Wheat and soybeans have good opportunity for upward demand revisions here. In late July 2022, outstanding soybean export orders for the 2022/23 marketing year stood at 545.8 million bushels, nearly 1.5 times higher than the same time a year ago. For that time of year, it was the most advance orders for new crop soybeans placed by international buyers since the 2013/14 marketing campaign.

During July 2022, new wheat export orders increased by over a quarter. That same time a year ago, orders had only risen by 3%. As of late July 2022, current marketing year outstanding wheat export sales were nearly 8% higher than the same time a year ago rising to nearly 213 million bushels at that time.

Wheat production focus shifts to spring wheat

Wheat Production

Farm Futures’ Feedback from the Field series has reported favorable yields for soft red winter wheat crops across the Midwest. Spring wheat conditions have largely trended good to excellent for most of the growing season, despite the slow start. This past week was the first time in the growing season ratings significantly declined according to USDA’s latest Crop Progress report, though the crop has completed its heading phase and is now maturing until harvest peaks.

The market is not expecting any significant revisions to 2022 winter wheat production estimates in tomorrow’s reports. However, anticipated spring wheat production gains could result in some bearish price action for the Minneapolis Grains Exchange.

World production and usage data to focus on Ukraine

World Ending Stocks

At the global scale, the top item everyone will be awaiting is any updates to Ukraine’s export paces. Ukraine began shipping grain cargoes out of its Odessa, Chernomorsk and Yuzhny ports on Aug. 1 for the first time in five months following Russia’s military invasion and naval blockade.

As of Tuesday, 14 ships carrying Ukrainian grain and/or oilseed products have departed from the Black Sea. Ukraine still has 20 million MT of grain and oilseed products to ship from its 2021/22 reserves and is expected to harvest 40 million MT of ag products from the 2022/23 harvest. Shipping paces will need to accelerate so the country does not face significant storage issues in the coming months, especially as peak harvest activity begins to ramp up across the Northern Hemisphere.

The market is going to be watching USDA-WAOB’s forecast for Ukrainian shipping paces for any clues about when shipping paces and volumes will increase as well as who is buying. So far, the ships have departed for Turkey, Lebanon, England, Ireland, Italy, and China.

But there has been no sign that Middle Eastern and African buyers have returned to Ukraine’s Black Sea ports over the past two weeks. It is possible that Russia will step up its exports to these countries, especially as U.S. wheat exports are largely focused on courting Southeast Asian (excluding China) and Central American buyers.

The “Grain Initiative,” referring to Russia’s willingness to let Ukrainian grain cargoes pass through the Black Sea unharmed, expires at the end of October 2022. Any WAOB revisions to Ukraine’s shipping paces will reflect market confidence – or lack thereof – in the deal.

For your reading pleasure

Finally, I want to give a shout-out to the fantastic brokers who write regular Ag Marketing IQ blogs on our site. This crew has provided so many great insights for our readers leading up to the August WASDE and I hope you have all been able to benefit from their knowledge (I have!). Here are quick links to their articles. Good luck!

Naomi Blohm (Total Farm Marketing) - Anticipation builds for USDA’s August report

Bryce Knorr (Farm Futures contributing analyst) - What happens to markets after USDA’s Aug. 12 report

Brian Splitt (AgMarket.Net) - A history lesson to consider for next week’s USDA report

Naomi Blohm - Corn, soybean markets brace for August USDA report

Brian Basting (Advance Trading) - How accurate is USDA August yield forecast vs. final estimates?

Bryce Knorr - Grains try to prove an early summer bottom

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