USDA reports preview
August 11, 2008
OMAHA (DTN) – Given the relatively late development of 2008 row crops, yield estimations still aren’t much more certain than they were last month, and the focus of the August USDA Crop Production and Supply and Demand reports, to be released Tuesday morning, could fall on acreage and demand observations.
Since the last physical observations made in early June, USDA is theoretically expected to have more accurate data about whether production expectations for corn and soybeans are objectively more bullish or bearish than the last set of numbers we saw in July. For instance, many fields across the heart of the Corn Belt have scattered spots where seed never emerged or plants were drowned out during the wet spring and stormy summer. Those pockets won’t produce harvestable grain.
After a fresh producer survey in early August, USDA may be able to more accurately gauge what the total harvestable acreage is for each crop, and may therefore be in a position to release somewhat more bullish (smaller) production projections. For example, if the total 2008 U.S. corn crop gets a projection near 11 billion bushels – after last year’s 13 bb crop and the demand that’s easily around 12.5 bb – that could spark a very bullish reaction in the futures market. The same is true for a soybean crop less than 3 bb when ending stocks are once again expected to be nearly as tight in 2008-09 (around 140 million bushels) as they were in 2007-08 (around 130 mb).
If that kind of bullish news does not show up in the reports, the markets already seem to be bracing for a nominally bearish report. After a month or more of generally favorable weather, yield estimations are expected to appear larger than they were in July, and yield estimations are indeed where the focus usually centers on these August reports.
Leading into Tuesday, traders’ published pre-report guesses for what the government’s numbers will look like are generally bearish, with world production and ending stocks not causing alarm and U.S. ending stocks expected to receive boosts since July’s reckoning. The average yield guess for corn is now seen at 152.6 bushels per acre (a 3-percent increase from July’s 148.4 bpa estimate), and the average production guess is at nearly 12 bb. The average yield guess for soybeans remains near July’s 41.6 bpa (recall that this figure was never really adjusted down since the spring) and the average production guess is just above 3 bb.
The other factor that is keeping the grain and oilseed futures markets bearishly inclined as we head into Tuesday is the sharply higher trend in the U.S. dollar index. Other currencies continue to lose ground, making the U.S. dollar and dollar-denominated goods (like our crops) seem relatively more expensive. This is traditionally bearish to prices and has probably been a stronger influence on trade in the week leading up to Tuesday’s report than any pre-report guesses, but it will also be interesting to see if this development shapes USDA’s projections for crop demand, specifically export demand, in the supply and demand report.
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Elaine Kub can be reached at firstname.lastname@example.org.