USDA October surprises?

By Ray Grabanski
Special to the Farm Forum

10/10/17 — This week the news is pretty slim that affects the markets. Harvest is underway, but so far we are behind normal in harvest progress as the crop matured later than normal, and rains have delayed harvest in many locations (first the western Corn Belt, and now moving into central and eastern Corn Belt). The first frost of the year hit the Dakotas and northern Minnesota this morning (Oct. 10), but that was anywhere from 1-3.5 weeks later than normal. Most crops had already reached maturity in these areas, and if anything could actually help to dry down crops more quickly now that the first killing frost has hit.

It was fortunate that crops have not had a killing freeze earlier, as many crops were behind normal in progress, especially in the northern Corn Belt. An early frost could have been devastating in 2017, but that wasn’t to be the case. Instead, the late season has allowed most crops to reach maturity, and the potential yield of both corn and soybeans has therefore been steady or gone up the past month. The Pro Ag yield model has risen a little over 1 bu/acre in corn the past month, and soybean yield models are about unchanged. But so far harvest yields have been surprisingly good, especially in the central and southern Corn Belt as heat was absent from the first part of August forward. That allowed crops to develop without stress, and is leading to big harvest yields. In some cases the yields are even better than last year, a feat most of us didn’t think possible for many years. But that means it’s likely that yields will go up in the October USDA report Thursday, Oct. 12, in both corn and soybeans. The average trader expectation is a 0.1 bu/acre rise in soybeans to 50 bu, and a 0.2 bu/acre rise in corn yields.

One area that has not received much attention is the acreage numbers for corn and soybeans, which Pro Ag believes will be revised in the October report. That could be the biggest surprise of the report, as the traders expect only a small increase in soybean acres (286,000 acres) and some sources even expect a slight rise in corn (35,000 acres) while other sources expect a slight decline. Instead, Pro Ag suspects there will be a much larger shift from corn to soybeans (perhaps a million acres or more). That means we could see a bullish corn report (as acres are lowered), and a bearish soybean report (with higher acres). This could be the greatest surprise as we may have carried the wrong acreage since last March’s intended planted acreage report.

Of course, always interesting is the updated yield numbers for corn and soybeans, as they will reflect right down to the bottom line (ending stocks). Yields should not deviate much, though, from last month as crop ratings have been fairly steady during that time. In fact, our yield estimates were relatively stable all year, fluctuating from just below trend yields to begin the year, to now be just above trend yields. That might explain why prices have been so stagnant the past few weeks, as there has been very little price movement in corn and soybeans.

Weather so far has been moderate for the most part the past few weeks. Temps have been above normal, and the next 2 weeks long range forecast is still calling for above normal temperatures. Precip forecasts are a bit on the wet side for the central Corn Belt the next few weeks, while most other regions are forecast to have normal to below normal precip. That is especially favorable for the western Corn Belt, where producers have suffered through a wet last half of September that soaked soils pretty good in some areas. Minnesota producers especially have endured a wet September, and need some drying of soils to get back into fields. Hopefully that occurs this week to get those combines back into fields.

It will be interesting to see the USDA October report, with especially the acreage revisions potentially holding the biggest surprises. If you agree or disagree with USDA’s Thursday numbers, feel free to email me below with your comments about the report, and your 2017 corn and soybean yields.

Ray Grabanski can be reached at [email protected]