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Corn yields in better soils are surprisingly good, says the analyst

The USDA endorsed our October report today, increasing both corn and soybean yields, ending stocks and lowering the price.

For wheat, however, it was a positive report. So it seems we will have plenty of corn / soybean stocks for the coming year. But wheat becomes much firmer.

Soybeans saw the biggest changes in the October report, from 185 million bushels (mb) ending stocks forecast in September to 320 mb ending stocks in October – essentially twice as large! It’s not often that we see a nearly 100% increase in forecast ending stocks in a month – but today for soybeans. That doesn’t make soybeans remotely cramped anymore – quite a change in the numbers. Most of the increase was due to a 0.9 bu / acre increase in soybean yields to 51.5 bu / acre, and the remainder came from the 2020 crop inventory increase made in the September 30 report . So overall, this has been a very pessimistic report on soybeans.

The change in ending corn stocks was not nearly as big, but with soybean stocks in abundance, corn won’t have much to compete with soybeans for hectares in 2022. with closing stocks up to 1.5 billion bu (from 1.408 in September and against traders’ expectations of 1.421). So the report was bearish corn, but not nearly as bearish as soybeans.

Wheat was a very different animal, with closing stocks falling by 35 mb to 580 mb, the lowest level since 2007/08 (when prices were very explosive).
The global ending stocks of wheat were also reduced to 288.4 mln t from 292.6 in September. So, unlike corn and soybeans, where the report was bearish, the wheat numbers were all on the bullish side.

The weather forecast is getting drier, with below normal precipitation forecast for the next week for all but ND, SD and WY. There is snow in MT, WY, CO and AZ today and will move east, but likely warm to rain. Temperatures remain above normal for the entire two week period and there will be almost no rain anywhere in the corn belt in the 8-14 day forecast.

Essentially, that forecast means that the harvest could almost be over by October this year.

Pro Ag did not expect any bullish news in the October USDA report as our yield models have hardly changed since September. However, actual crop yields were surprisingly good in most Corn Belt locations, with both corn and soybean yields being better than expected in many areas, including the dry northwestern Corn Belt. Rain, which did not arrive until August 20, revitalized the yield potential in the northwestern corn belt. The best land (as always) fared best, with the subsoil helping the crops last until the onset of rain. Poor soils fared much worse, with the lightest soils having next to no production of corn or soybeans due to drought.

But the yields on better soils are surprisingly good. The same is true for many corn belt locations. This prompted the USDA to aggressively increase soybean yields and modestly increase yields for corn in the report. The largest increases in production were in IA, MN and NE, the northwestern corn belt – the areas likely to be hardest hit by drought. But as mentioned earlier, the late rains in many areas (especially on the better soils) revitalized yield potential and crop yields as soon as the “lie detectors” (or in other words: combine harvesters) hit the fields. The bushels in the combine hoppers have been very often larger than expected this fall, leading to higher yield projections from the USDA.

This is relieving the markets now, especially for corn and soybeans, as the additional stocks will make the future much more comfortable.

With recent rains replenishing soil moisture deficits in the northwestern Corn Belt areas, the outlook for next year is much better.

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Ray is President of Progressive Ag Marketing, Inc., a leading nationwide marketing company. See http://www.progressiveag.com for rankings and links to data from Top Producer Magazine and Agweb.com.

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