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Analysts update corn and soybean yield estimates
By Karl Setzer
We are starting to see more crop scouts and analysts update their U.S. corn and soybean yield estimates. Given current crop ratings and growing conditions, some reductions have been made. One crop scout now has the U.S. soybean yield at 51 bushels per acre compared to the USDA projection for 51.5 bpa. While this does not seem like a large decrease it will gain market attention given the already minimal new crop stocks to use estimate. The other side claims this yield decrease will be offset by reduced demand. Analysts feel there is a 32 percent chance of an above trend yield on soybeans, 48 percent chance of a trend yield, and 15 percent chance of below trend yield on soybeans.
Some analysts have also lowered their corn yield estimate, cutting it 2 bpa from the USDA projection to 175 bpa. There is more room for yield loss on corn, but we still need favorable production to keep stocks from declining. Analysts believe there is 44 percent chance of an above trend corn yield, 27 percent chance of a trend yield, and 19 percent chance of below trend yield. The crop that is getting more attention is spring wheat as analysts feel the United States could see a record average yield of 51 bpa this year.
Pollination is now over for much of the U.S. corn crop, especially in the heart of the Corn Belt. We are still seeing pollination in the fringe areas, but current weather models indicate these fields should see little stress at this time. The entire U.S. corn crop has seen some weather stress this production season but nothing that would warrant a smaller yield than what the USDA is currently using in balance sheets. This is greatly limiting the volume of risk premium in corn, as well as managed money interest, which has been a major source of support for the complex.
We are now at a stage of the year where more weather interest is placed on soybean development. So far, the U.S. soybean crop has been subjected to very little stress, if any. Soybeans are much more tolerant of heat and dry conditions than corn. Trade is still of the mindset that the projected national average yield of 51.5 bushels per acre can be reached. The concern in soybeans is that just a 1 bushel per acre decrease in yield will have a sizable impact on balance sheets given our tight stocks to use forecast. Given the lack of major production issues, more attention is on soybean demand, which has been mixed in recent weeks.
There is a considerable difference in opinion building over U.S. soybean balance sheets. Export demand has been very strong this year but we are seeing this change. In several of the most recent export sales reports bookings have been net negative due to cancellations. Soybean crush is running ahead of the pace needed to meet the yearly USDA projections, but these sales cancellations will likely more than offset any increase to crush. The end result of this is a likely increase to carryout, even if just a minimal amount.
One of the leading issues on all global trade right now is Chinese uncertainty on demand. A reported 17 percent of China’s economy is now in COVID lockdown, which is greatly impacting demand. There are also reports of high unemployment in China, especially on younger people who tend to eat out more, and drive commodity demand. What may be the greatest worry is reports China is not allowing money withdrawals at some banks, raising questions on their entire economy.
Trade is starting to pay more attention to the U.S. beef supply. The number of cattle on feed in the country is unchanged on the year, but there are thoughts this may contract in the near future as herd liquidation due to tight feed supplies in the Southwest. Corn values have receded though, which is helping temper poor pastures. This is especially the case with strong retail values which is keeping cash cattle elevated as well. The weak U.S. dollar has also led to elevated feeder cattle imports from Canada, helping prevent major contractions in the cattle inventory. In turn, these should keep the U.S. beef supply at an adequate level.
U.S. beef is now highly competitive with Brazil, who has been a leading competitor on sales. The downside of this is that the United States continues to struggle to make higher grade offers, and importers are refusing to pay any premium for lower cuts. This is weighing on U.S. beef exports, even though we are in line with the global market.
When it comes to the world meat supply, more interest is on China’s pork production. The hog herd in China has been volatile in recent years as the country recovers from its African swine fever outbreak. As the country’s hog herd built, so did its feed demand and accompanying imports of feed grains. COVID hit China hard though, and as it did, restrictions were placed on the country and its livestock industry contracted, especially hogs. China is now reporting a sow inventory of 42.7 million head compared to last year’s 45.65 million head. This is an indication the country may see fewer hogs on feed in the future, but at the same time, higher quality pork production.
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