USDA Raises Corn And Soybean Production in October Reports, Here’s Why Corn Prices Could Still See Support

As the 2021 harvest season continues across the country, USDA’s latest look at yields shows the U.S. corn and soybean crops are larger than what USDA forecast in the September reports. Soybean prices were down double digits after the report, after closing lower on Monday.

Based on USDA’s National Agricultural Statistics Service (NASS), the October Crop Production Report indicated corn production is up 3% over last year, while soybean production is forecast to increase 5% from 2020.

“The biggest takeaway for me is that the corn market is going to remain stable here,” says Peter Meyer, lead grain and oilseeds analyst with S&P Global Platts. “Even if the USDA is wrong, and let's say there's two more bushels per acre out there and we're right at 178.5 , that's really only going to create another 170 million bushels in supply.”

USDA’s report indicates national corn yields are expected to come in at a 176.5 bu. per acre average, up 0.2 bu. per acre from the September report. USDA left harvested acres unchanged at 85.1 million acres.

The soybean yield was increased nearly 1 bu. per acre from September, now forecast at 51.5 bu. per acre. That’s also 0.5 bu. per acre above last year’s final yield.

USDA’s soybean yield map shows all but four soybean producing states either have higher yields than what was printed in September, or no change to what USDA forecast last month. The largest change sits in Wisconsin, where USDA increased the soybean yield by more than 10 bu. per acre. South Dakota is up 5 bu. per acre, and North Dakota’s soybean yield was boosted by 4 bu. per acre.

According to USDA’s maps, USDA’s slight adjustment in the corn yield came from higher yields in the Western Corn Belt, but lower yields in the Eastern Corn Belt. USDA also shows yield expectations in the South are mixed, with states like Alabama and Mississippi expected to produce lower yields, while Georgia and Arkansas show yields above the September report.

“What we've really seen this year is those genetics really in play, and you talk to the seed companies, and they will tell you that as well, that they really haven't added bushels to the bottom. What they've done is they've negated the negative impact of poor weather on the top end,” Meyer adds.

Meyer says USDA didn’t make much adjustment to China’s corn crop, and at the current demand picture, he sees corn prices having stability at these levels.

“I don't see a $5.45 farm gate price like the USDA does, we’re at $5, but still, $5 corn is pretty darn good,” says Meyer. “On the bean side, it's all about demand.”

With the change in yield, USDA adjusted soybean ending stocks to 320 million bushels. Brian Splitt of AgMarket.net told AgDay's Clinton Griffiths the adjustment to soybean stocks could have been worse.

"320 million bushels is not as bearish as what we thought maybe the worst case scenario could have been," says Splitt. "We at AgMarket.net were thinking maybe the carryout would go up near 370 million bushels. And it might over time, but I think this report could have been worse for soybeans than it was. You look at the world stocks, world stocks came in bigger than the September was the report. So that's adding to a little bit of the pressure here. And then you look at the the corn and the wheat market, corn world stocks are bigger than expected. Wheat world stocks less than expected net net between the two feed grain stocks, actually about unchanged month to month. And so I think you're going to continue to see wheat become the leader, versus corn, and it needs to continue to make sure it's priced out of feed rations."

Could Soybean Demand Forecast Sink?

Meyer says the biggest question he has after USDA’s updated supply and demand figures from the World Board, is how USDA didn’t make bigger changes to the soybean export number.

“My real concern is on the soybean export numbers,” says Meyer. “USDA left soybean exports at 2.09 billion bushels. And that despite the fact that we are down 15 million metric tons from last year at this time as far as our export sales and shipments pace combined. And even though the number is down about 4 million metric tons from last year's 2.265, we're still down 10 million metric tons, and in rough numbers, that's 400 million bushels.”

Meyer admits the World Board had a difficult job in trying to peg the soybean export number for the 2021/2022 crop. He says between Hurricane Ida crippling ports at the Gulf Coast to a slowdown in sales, he believes soybean exports are at further risk.

“Ida still continues to cause some real problems there in the Gulf,” says Meyer. “We noted Cargill is starting to export stuff out of Houston. But the issue really becomes the barges at this point. We have good contacts with the barge companies down there, and they're not even sure where some of these barges are anymore. That leads itself obviously to the spike in fertilizer prices up north, while it also leads itself to problems on the export markets to the south.”

Meyer expects USDA to increase the soybean crush number as demand for soybean oil growers for renewable diesel. But even then, he thinks the real story with domesticated soybean demand, and soybean benefiting from the need for renewable diesel and sustainable aviation fuel, isn’t something that won’t hit this upcoming crop year.

“The problem is that all these investments that have been listed by all these major refineries will not kick in until 2023,” says Meyer. “So, we think the crush capacity, which we currently believe is about 2.35 billion bushels, and in the U.S. will be 2.5 to 2.6 billion bushels by 2023. That will reduce our reliance on exports."

He thinks that story comes a year too late, as more growers look to increase soybean acres next year.

Meyer says looking at the latest USDA reports as a whole, wheat had the most bullish story. USDA showed the global wheat balance sheet continued to tighten, with production forecast to be down 4.4 mmt for the 2021/2022 growing season.

“I will say that the wheat numbers, both globally and domestically, were supportive,” adds Meyer. "Wheat is up double digits at the moment. And that is certainly helping the corn market. But the soybean market is really starting to try to filter through the lack of exports and a lack of export demand with the Brazilian soybean crop going into the ground.”