Recent mid-September rains in the American Midwest have been seen generally as a positive but there’s a lot of chatter that any precipitation at this time of the year won’t do too much for the crop. As such, the USDA recently said in their September WASDE report that average soybean yields will be lower than previous estimates at 41.2 bushels per acre, putting total U.S. production at 85.7 million tonnes. With the price ratio for corn to soybeans hovering around 2.5:1, South American farmers are expected to plant even more soybeans this year, producing another record crop of over 86 million tonnes.
The USDA also said, however, that the U.S. corn crop is bigger than expected, contrasting many analysts’ (and farmers’) predictions, estimating average yields to be 155.3 bushels per acre and total production to come in at 351.63 million tonnes (more than one-third of the entire global corn production of 956.67 million tonnes). It’s our opinion this most recent report from the USDA may not reflect some of the hot temperatures seen in the U.S. the last few weeks and that further yield and production estimate reductions could result. Further, the USDA is playing a little cat and mouse with soybean demand as they refuse to acknowledge sustained purchasing. However, they did raise the average estimated outlook price to $12.50 a bushel.
As for wheat, the USDA sees a massive global crop with Aussie wheat output estimated at 25.5 million tonnes, 107.96 million tonnes in the former Soviet Union states (Russia, Ukraine, etc.), and 30.5 million tonnes here in the Great White North. There’s even some buzz among the more bearish analysts the Canadian wheat crop could come in at more than 33 million tonnes. If the yields we’ve been hearing are any indication, the possibility is there. Rain is definitely seen as a positive for winter wheat planting, which in turn leads to lower prices on the board as a bigger crop gets anticipated. Colorado harvested its smallest amount of winter wheat acres since 1965, bringing in only 43.5 million bushels, a decrease of about 60 per cent from last year’s output and the 10-year average.
The Ukraine continues to push its way through the door to big agricultural players club as this year they expect to become one of the top 3 exporters of corn. Infrastructure issues remain in the former Soviet Union nation but the country is working at making it easier for investment in the country. Despite China recently loaning three billion USD for infrastructure improvement in Ukraine that’s to be repaid with grain, the Asian supernation is set to produce a record corn crop themselves at 215 million tonnes.
All in all, big numbers coming off the fields around the world continue to push a sideways-to-bearish trade in the markets. Canola may be supported by a smaller U.S. soybean crop but record rapeseed production is expected this year. The bigger supply will likely offset any increased demand that comes from buyer looking to substitute away from more expensive soybeans.
Brennan Turner is originally from Foam Lake, Sask. where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online grain marketplace. His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).