MarketsFarm — An unexpectedly bearish supply/demand report from the U.S. Department of Agriculture (USDA) last Friday is still putting pressure on crop prices nearly a week later, according to one trader.
In the department’s WASDE report, the estimated average yield for corn was revised downward from the month before by only 1.6 bushels per acre to 175.4. Meanwhile, the estimated average yield for soybeans was 51.9 bu./ac., up 0.4 from July. Analysts had previously expected larger drops in average yields for both crops as well as for wheat.
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Ryan Ettner, a commodity broker for Allendale Inc. in McHenry, Ill., said that the trade assumed before the weekend that yields would be lower. However, the report, in addition to limited weather risks in the forecast, caused a shifting of gears.
“The report for corn and (soybeans) on (Friday) were nowhere near supportive as the price level you saw because I think trade was already assuming, ‘Forget these yield numbers. They’ll go down quite a lot more in (the September report),’” Ettner said. “Then we came back from the weekend and the forecast maps took away any risk of temperature or dryness.”
Ettner believes that the weather market is coming to an end, just as crop tours begin next week. Next month’s USDA supply/demand estimates will be the first of the crop year to depend on data taken from the fields themselves.
“Instead of getting rains and missing rains on the forecast and seeing if they fall and if they’ll help the crop, we’ll actually be out in the field and measure what we really do have out there,” he said. “Once you start doing that, your focus starts to turn away from weather.”
After the crop tours, traders’ focus will then turn to crop exports, which are expected to rise later this month, and then finally crop yields, according to Ettner.
“Beans would be (the No. 1 focus) for two reasons. Weather still affects the beans more than corn and wheat by far. When crop tours start next week, (the focus) flips over to corn because you can measure kernels with all the people in the fields actually scouting. You can count kernels; you can count ears; you can get a fairly decent estimate on corn.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
