You are probably familiar with the results of Friday’s USDA crop estimates by now. There is a 13.1 billion bushel corn crop with a 152.8 national average yield. Corn exports and feed use will go up, and we’ll have a 1.5 billion carryout. The soybean crop was estimated at 2.6 billion bushels, with a 41.5 bushel per acre yield. Supply demand numbers were generally left unchanged for beans. USDA adjusted its wheat estimate from the July report, and raised price prospects for the year. Let’s visit with several Outlook Specialists and get their perspective on the August 1 Crop Report.

Following the release of the report on Friday, Mike Woolverton at Kansas State, Melvin Brees at the University of Missouri, and Alan May at South Dakota State University provided comments on the USDA statistics, and said neither they nor the market seemed to be surprised with the numbers. However, they had some insight on the impact it would mean for producer.

Mike Woolverton said the biggest surprise for many was the nearly 153 bushel average corn yield and said corn producers in dry areas will question that. But he added, “Abundant moisture conditions in the Great Plains and parts of the Central Corn Belt are making a difference this year. Where the corn is good, it is very good.” Melvin Brees said the national yield estimate was a jump up, and found some conflict in the Illinois and Iowa statistics, “Probably the most surprising yield projection is Iowa’s 180.0 bpa. In a state with widespread dry conditions, this past weeks’s good to excellent crop condition received ratings of 61 percent. This exceeds Illinois’ average yield of 178.0 bpa which has the higher good to excellent condition rating of 77 percent!”

Monthly adjustments to the estimates will be made until harvest is complete, and Alan May believes that the current dryness in the Western Cornbelt will begin to show up in future reports, “With the dry weather conditions of the western corn belt moving further east and becoming potentially more problematic each week, projections will be more difficult to ascertain. In this demand driven market, production becomes even more critical to establishing price direction and range of movement, so only time will tell how accurate these early projections are to the final production estimate that will be released after harvest.”

In addition to the crop estimates from the National Agricultural Statistics Service, USDA’s World Agricultural Outlook Board also released its supply and demand estimates for the domestic and foreign crops. Woolverton says that report indicates world stocks of livestock feed will be tight in the coming year, “Hidden in the WASDE report were other numbers that should lend a bullish flavor longer term to the corn market. Global coarse grain production was lowered by 5.8 million metric tons; equivalent to 228 million bushels of corn. Drought and heat in Southeastern European Union countries and in Former Soviet Union countries that grow corn and other coarse grains are to blame. The reduction in coarse grain production and increased usage worldwide caused global corn carryover to drop by 6.1 million metric tons.” The only corn surplus anywhere is the 1.5 billion in the US, but May believes it is small enough to allow for market volatility, “This was viewed with little concern for the most part, even though it was a bit higher than the average trade estimate. The production estimates and carryover estimates will be watched closely in the September report but for the time being, this production level is viewed as sufficient to meet projected demand for the 2007-08 marketing year. However, expect this market to continue to be volatile through the rest of this year into next year.” And he said with the demand from the ethanol industry, corn will have to outbid beans next year for US acreage.

Speaking of beans, the estimated production of 2.6 billion bushels was anticipated, but Woolverton says adjustments were made in how it will be used in the coming year, “Estimates of higher crush and higher exports will reduce U.S. carryover stocks this year which gives a lower expected carryover next year; down to 220 million bushels, less than a four week supply. Carryover that low does not give much of a safety cushion and will be worrisome to a soybean trade trying to bid more South American hectares of soybeans into production this fall.” And he believes that the higher exports will be the result of Chinese demand, “Soybean production will be lower than expected in China this year because of dry conditions in the Northeastern part of that country. China, the largest soybean importer in the world, is now expected to import 34.5 million metric tons in 2007/08; 20 percent more than last year.” Alan May says the bean market will now be in transition from large to small carryover, and the market is already anticipating 2008 acreage, “If soybean prices continue to strengthen, will those prices be strong enough to entice farmers to cut back on corn acres to take advantage of potentially higher soybean prices?” USDA estimated average prices in the coming year between $7.25 and $8.25 for beans.

However, USDA boosted both ends of the range for wheat prices for the coming year by 30¢ from $5.10 to $5.70. Part of that is due to global demand, and part to a resurvey of the Kansas wheat crop. USDA reduced harvested acreage by 400,000 and cut the Kansas production from the 300 million bushel July estimate to 288 million bushels. Woolverton says the global wheat supply should support US prices into next spring, “In the WASDE report, projected global wheat production was lowered by 1.9 million metric tons, or about 70 million bushels, because of reduced production in the EU-27 countries, Canada, Turkey, and Brazil. Lower world production and a slight increase in global wheat usage reduced world carryover stocks by 2 million metric tons. This on top of what was already a 30 year low global carryover, should serve to keep wheat price high through the Great Plains planting season and perhaps into spring, when Northern Hemisphere winter wheat comes out of dormancy.”

Summary:

There were few surprises in the August 1 crop report, however Outlook Specialists said the estimates will continue to be adjusted through the harvest period. While the corn crop is the largest since 1933, there is demand for it both domestically and abroad and the corn industry may have to bid for acreage in 2008 to ensure supplies. The soybean crop is sufficient for the year, but carryover will be significantly reduced to the point of needing to also bid for 2008 acreage. Wheat prices will be even stronger in the coming year due to reductions in the US supply and strong foreign demand.