I recall the collective groan from U.S. agriculture following USDA’s July Crop Production reports, an involuntary response to the government leaving 2017 yield numbers unchanged from June. But, if we recall, it could hardly be otherwise. USDA uses trend-line yield calculations through July, regardless of what the weather might be across the U.S. through the early part of the month. But things change once the calendar turns to August, with this month’s report receiving marquee billing as the “first field-survey-based” crop production report of 2017. July weather is now a factor, though one needs to remember that the agency’s own crop condition numbers are not factored into the crop production reports.
Now that we are in the month most known for the birthdays of giants (Meriwether Lewis, Willian Clark, President Barack Obama, Sen. John McCain, Warren Buffett and of course Fidel Castro, just to name a few), we don’t ask if USDA will make changes, but rather how large these changes will be.
Of all the numbers, and there are plenty, in this month’s reports, the most watched will be 2017 U.S. corn yield. Most farmers can quickly quote you that USDA’s trend line is calculated at 170.7 bushels per acre (mine is below that at 166.3 bpa), with 2016 seeing a record 174.6 bpa. Will USDA go all in on its yield estimate, meaning backing it off as far as July weather would possibly suggest? Or will USDA take a more measured approach, knowing it has between August and next January to arrive at some feasible yield estimate? History would suggest that the latter is more likely, though on occasion, USDA has been known to surprise by moving all its chips to the center of the table.
Pre-report estimates showed a range reflecting this question, the high end at a modest decrease of 168.5 bpa with the low what could be a catastrophic 162.8 bpa. With more pin-the-tail-on-the-donkey attempts coming in closer to the high side than to the low, the average I look at came in at 166 bpa. Using this yield average and leaving harvested area unchanged at 83.6 million acres — a likely situation until at least the October round of reports — puts total production on my spreadsheet at 13.882 billion bushels. This is close to the average pre-report estimate of 13.841 bb.
As most of you know, I don’t get too caught up in the hubbub and hoopla of new-crop production guessing. These numbers, even the August variety, are written in pencil for a reason. They will change, frequently, over the months ahead. I’m more interested in old-crop ending stocks, as it lays the foundation for what will ultimately be new-crop stocks on hand. Given the pace of export shipments through July, USDA could once again sit pat on its demand estimate of 2.225 bb. In fact, USDA could leave total old-crop demand unchanged, meaning ending stocks that become new-crop beginning stocks would still be calculated at 2.370 bb. This is still slightly less than my projected Sept. 1 stocks figure of 2.387 bb, calculated following the June 30 Quarterly Stocks report. The average pre-report estimate for old-crop ending stocks came in at 2.366 bb.
So let’s assume (we all know what that stands for thanks to the Bad News Bears) USDA comes in near expected beginning stocks, yield and production. By my calculation, that would put new-crop total supplies near 16.3 bb. Now, if we also assume USDA leaves its new-crop demand projection unchanged at 14.35 bb, 2017-2018 ending stocks would come in near 1.95 bb. More importantly, this would decrease ending stocks-to-use (es/u) to 13.6%. But before we get all excited about that — 2016-2017 would be calculated near 16.4% — we need to keep in mind that the expected 2017-2018 es/u would still be third highest since the 2006-2007 marketing year.
As you’ve probably guessed, this month’s USDA Crop Production report is all about corn. Soybeans will get its turn in the spotlight next month, when August weather plays more of a role. Be that as it may, pre-report estimates are looking for a slight reduction in production of almost 60 million bushels due to a slight decrease in expected national average yield to 47.4 bpa. As with corn, I’m more interested in old-crop ending stocks than new-crop soybean yield and production, particularly with the always entertaining September Quarterly Stocks report drawing closer on the horizon. The average pre-report estimate for old-crop ending stocks came in at 401 mb, in line with my June 30 calculation.
As for wheat, the weather-decimated spring wheat yield guess will receive the most attention. The average pre-report guess came in at 393 mb, down significantly from July’s USDA estimate of 423 mb and last year’s final 534 mb.
It’s August. It’s USDA. It’s almost guaranteed that change is coming.
Editor’s note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT Thursday for an in-depth look at the latest USDA Supply and Demand and Crop Production estimates and what they might mean for the markets. Register now at: http://bit.ly/…
|U.S. CROP PRODUCTION (Million Bushels) 2017-2018|
|U.S. AVERAGE YIELD (Bushels Per Acre) 2017-2018|
|U.S. ENDING STOCKS (Million Bushels) 2017-2018|
|U.S. ENDING STOCKS (Million Bushels) 2016-2017|
|WORLD ENDING STOCKS (Million metric tons) 2016-2017|
|WORLD ENDING STOCKS (Million metric tons) 2017-18|