Final Yield Estimates in January

What’s happened…

The December WASDE (World Agricultural Supply and Demand Estimates) was released on December 8 with little changes reported both domestically and worldwide. Yield estimates for the U.S. crop are not changed in December. In January, the final yield estimates for this past summer’s crops will be released. In some years, January figures have an impact. In most years, changes are minimal. The January figures for this year will be watched closely, as a challenging growing season has made it difficult to estimate yield. For many, harvest results were different than anticipated, as most producers experienced yield results better than they expected before harvest.

Why this is important…

A look back at dry weather in late August and early September had the USDA estimating yield near 173 bushels per acre for corn and 49.5 for soybeans. In October, corn was raised to 174.9 and soybeans to 49.9 bpa. Better yield results were reflected in the increases by the USDA. The question is if they are done raising yield, and if it matters. As with any new news, the market will determine how important changes will be, and this is usually reflected in price activity shortly after the data is released. Yet, unless the figures released on January 12 are surprises, don’t expect much price activity. The consensus seems to be that yield for both corn and soybeans could edge upward slightly, however, big changes are not expected. What will loom larger by mid-January is prospects for South American production, where most of the crop is in the heart of the growing season.

We’ll use simple math for rounding purposes. Let’s say, in the case for soybeans, U.S. yield is increased by half a bushel. On 80 million harvested acres, this is about 40 million bushels (mb). This change would probably have little impact on prices. If Brazil, which is expected to produce about 163 million metric tons (mmt) experienced only a 2% change in its production estimate, this would be approximately 3 mmt or just over 100 mb. The point is that South American weather is likely very impactful in January. Therefore, it will weigh more on a trader’s mindset than what might be small adjustments to U.S. production. From a marketing perspective, farmers should pay close attention from mid-December onward to Southern Hemisphere weather and crop conditions to help guide them in marketing decisions. It is expected that Brazil’s soybean production will be record-large. With a rebound in Argentine production after a drought last year, combined with Paraguay adding 1 mmt, an increase of approximately one billion bushels from the Southern Hemisphere could be at hand.

What can you do?

If you have stored corn or soybeans, have a conversation with your advisor. Design a strategy that will work best for your situation, understanding the risks and rewards. Prepare for potential surprises on the January WASDE report, along with weather and crop development in the Southern Hemisphere, and how these events could impact prices and your bottom line. Be prepared for various scenarios so you can manage price volatility. The markets are always changing.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.

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Bryan Doherty