FarmPolicy

February 20, 2020

Crop Estimates

Yesterday the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) released its 2008 Crop Production Summary.

In part, the report stated that, “Corn for grain production [related graph] in 2008 is estimated at 12.1 billion bushels, up 1 percent from the November forecast but 7 percent below last year’s record high. The average U.S. grain yield is estimated at 153.9 bushels per acre, up 0.1 bushel from the November forecast and 3.2 bushels above 2007. The 2008 yield is the second highest on record, behind 2004, and production is second largest, behind last year.”

The NASS report added that, “Soybean production [related graph] in 2008 totaled 2.96 billion bushels, up 1 percent from the November forecast and up 11 percent from 2007. U.S. production is the fourth largest on record. The average yield per acre is estimated at 39.6 bushels, 0.3 bushel above the November forecast but 2.1 bushels below last year’s yield. Harvested area is up 16 percent from 2007, to a record 74.6 million acres.”

A NASS news release from yesterday included this brief recap of the production results: “An economic downturn, floods in the Midwest, hurricanes in the South and drought-like conditions in various areas of the United States made 2008 one of the most volatile years in history for the agriculture industry. In spite of all the challenges U.S. farmers produced an abundant corn and soybean crop, according to the 2008 Crop Production Summary released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service.”

Also yesterday, NASS released its annual Winter Wheat Seedings report, which indicated that, “Winter wheat seeded area for 2009 is expected to total 42.1 million acres, down 9 percent from 2008. Approximate class acreage breakdowns are: Hard Red Winter, 30.2 million; Soft Red Winter, 8.29 million; and White Winter, 3.62 million.”

The NASS report went on to explain that, “Planted area for harvest in 2009 is estimated at 42.1 million acres, down 9 percent from 2008. Seeding began last August behind the 5-year average pace and remained behind until mid-November due to wet weather and delayed row crop harvest. Nearly all of the U.S. acreage was seeded by December 1 with the exception of some intended acres in the Southeast and California. Seeding was complete by the end of December in California. The winter wheat crop condition at the end of November was rated 65 percent good to excellent compared with 44 percent the previous year.”

NASS also released its quarterly Grain Stocks report yesterday. This report stated that, “Corn stored in all positions on December 1, 2008 totaled 10.1 billion bushels, down 2 percent from December 1, 2007. Of the total stocks, 6.48 billion bushels are stored on farms, down 1 percent from a year earlier. Off-farm stocks, at 3.60 billion bushels, are down 4 percent from a year ago. The September – November 2008 indicated disappearance is 3.64 billion bushels, compared with 4.06 billion bushels during the same period last year.

“Soybeans stored in all positions on December 1, 2008 totaled 2.28 billion bushels, down 4 percent from December 1, 2007. Soybean stocks stored on farms totaled 1.19 billion bushels, up 5 percent from a year ago. Off-farm stocks, at 1.09 billion bushels, are down 12 percent from last December. Indicated disappearance for September – November 2008 totaled 889 million bushels, down slightly from the same period a year earlier.

“All wheat stored in all positions on December 1, 2008 totaled 1.42 billion bushels, up 26 percent from a year ago. On-farm stocks are estimated at 454 million bushels, up 57 percent from last December. Off-farm stocks, at 968 million bushels, are up 15 percent from a year ago. The September – November 2008 indicated disappearance is 436 million bushels, down 25 percent from the same period a year earlier.”

Meanwhile, the World Agricultural Outlook Board (WAOB) issued its monthly World Agricultural Supply and Demand Estimates (WASDE) report yesterday, the report incorporated the latest NASS estimates and stated that, “Ethanol corn use is lowered 100 million bushels as sustained negative ethanol production margins since early December have reduced incentives for ethanol output.” Related audio regarding the ethanol estimate, which includes comments from USDA Chief Economist Joe Glauber is available via this USDA Daily Radio Newsline piece from yesterday (MP3, one minute).

Yesterday’s WASDE report added that, “The projected season-average farm price for corn [related graph] is lowered 10 cents on each end of the range to $3.55 to $4.25 per bushel.”

A complete overview of U.S. corn variables was included on page 12 of yesterday’s WASDE report.

For wheat, the World Agricultural Outlook Board noted that, “The projected season-average farm price [related graph] is narrowed 10 cents on both ends of the range to $6.50 to $6.90 per bushel.”

And, with respect to oilseeds, yesterday’s report indicated that, “The U.S. season-average soybean price [related graph] range for 2008/09 is projected at $8.50 to $9.50 per bushel compared with $8.25 to $9.75 per bushel last month.”

A University of Illinois Extension article from yesterday (“USDA Reports Send Crop Prices Lower,” by Darrel Good) provided a comprehensive and easy to read summary of all of Monday’s newly released data.

After a detailed look at relevant supply and demand variables, the article indicated that, “The estimates of the 2008 U.S. corn and soybean crops and the estimates of December 1 stocks of corn and soybeans all exceeded pre-report guesses. The decline in winter wheat seedings was larger than anticipated. The reports were especially negative for corn prices and will likely end the month old rally in prices even with some worries about the Argentine crop. Prices could decline to the level of early December. The larger projection of year ending stocks and the slower rate of consumption suggest that corn acres may not have to increase much in 2009. The reports were less negative for soybean price prospects, but the larger inventory of U.S. soybeans will offset some of the concerns about the Argentine crop. An increase in U.S. acreage is not needed in 2009. On the surface, the winter wheat seedings report was a bit friendly. However, wheat prices will be pressured by lower corn and soybean prices.”

Philip Brasher reported yesterday at The Des Moines Register Online that, “The slowdown in the ethanol industry means U.S. corn supplies shouldn’t be as tight as once thought.

“Agriculture Department economists today raised by more than 20 percent — or 316 million bushels — their estimate of how much corn will be on hand at the start of this fall’s harvest.”

Bloomberg writers Jeff Wilson and Tony C. Dreibus reported yesterday that, “Wheat, corn and soybeans plunged the most allowed by the Chicago Board of Trade after the U.S. Department of Agriculture projected bigger supplies than forecast in December.

Wheat futures for March delivery fell 59.75 cents, or 9.5 percent, to $5.6975 a bushel in Chicago, after earlier reaching the maximum of 60 cents to $5.695 a bushel. The price has plunged 58 percent from a record $13.495 on Feb. 27.

Corn futures for March delivery dropped the 30-cent CBOT limit, or 7.3 percent, to $3.8075 a bushel. The most-active contract is down 52 percent from a record $7.9925 on June 27.

Soybean futures for March delivery declined the 70-cent limit, or 6.8 percent, to $9.66 a bushel. The price is down 41 percent from a record $16.3675 on July 3.”

Wilson and Dreibus explained that, “Rising corn and soybean inventories may decrease feed costs for meat producers including Tyson Foods Inc. and Smithfield Foods Inc. and lower global demand for fertilizer from Mosaic Co. and seeds from Monsanto Co. Increased wheat supplies may cut costs for Kellogg Co. and General Mill Inc., the biggest U.S. cereal makers.”

AP writer Christopher Leonard reported yesterday that, “U.S. farmers delivered a bumper crop in 2008, according to a government report released Monday that eased fears of a looming food shortage but caused commodity prices to drop.”

The AP article explained that, “News of the bounty came just six months after global commodity traders pushed crop prices to all-time highs on fears that growing demand for grain and crop-based fuels like ethanol would strain global food supplies.

“Monday’s report showed that while U.S. supplies will remain strong, global demand has weakened considerably, said Scott Irwin, chair of the agricultural marketing department at the University of Illinois at Urbana-Champaign.”

Mr. Leonard also noted that, “Ethanol industry groups were quick to cite the report as evidence that farmers can grow enough food to support demand for both food and fuel.

“‘With an expected surplus of nearly 2 billion bushels at the end of this marketing year, it is clear that farmers can supply ample feedstock for food, feed, fiber and renewable fuel production,’ Renewable Fuels Association President Bob Dinneen said in a statement.”

And Bloomberg writer Millie Munshi reported yesterday that, “‘The continued deflationary environment and economic slowdown is driving down potential demand for all the commodities,’ said Michael Cuggino, who oversees about $3.5 billion as chief executive officer of Pacific Heights Asset Management in San Francisco. ‘The drop in commodities is a symptom of a very negative period for the global economy.’”

Meanwhile, Reuters news reported today that, “Oil fell more than $1 a barrel to its lowest in more than two weeks on Tuesday, extending a near 8 percent overnight loss, as investors grew more pessimistic about energy demand on signs the world economy will slow down sharply.

“Worsening recessionary signs forced investors to flee risky assets such as commodities and take refuge in the safe haven of U.S. Treasury bonds on Monday, while Asian shares fell on concerns about the United States sinking further into recession.

U.S. light crude for February delivery fell $1.19 to $36.40 a barrel by 0715 GMT (2:15 a.m. EST), the weakest level since December 26. London Brent crude fell 81 cents to $42.10.”

The article added that, “Slumping fuel demand due to the global recession sent oil prices down 54 percent last year, and crude is now off more than $100 from its record peak above $147 a barrel last July.”

In a related item, the USDA’s Foreign Agricultural Service (FAS) recently issued a report entitled, “Oilseeds: World Markets and Trade,” which stated that, “In contrast to the past two years, when soybean oil prices were highly correlated with, and mostly driven by, crude oil prices, the two have suddenly diverged in just two months. Crude oil prices have continued to fall with diminishing demand due to the global economic recession. However, soybean oil prices remain relatively strong supported by a combination of fuel and food demand coupled with reduced U.S. crush and uncertainty over South American soybean production prospects. Apparently, the demand for food oil and supply considerations are now driving the soybean oil price instead of the demand for biodiesel.”

The FAS report also included this interesting graphical depiction of market price levels for crude oil and soybean oil.

Keith Good

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