In the USDA’s July WASDE report, U.S. corn yield was left unchanged from the June estimate. The lack of change was not uncommon, given the USDA has only made one July corn yield adjustment in the last decade. That was in 2012, when the USDA cut national corn yield on their July WASDE by 20 bushels per acre due to the extreme drought conditions. Historically, August is the first month in which the USDA makes adjustments to the national yield estimate. In six of the last seven years, the August WASDE report has brought an increase to the USDA’s national corn yield estimate, with the average increase being 3.7 bushels per acre. An adjustment higher this month to the national corn yield would put this year’s yield into all-time record high territory. The current record-high yield year is 2017, coming in at 176.6 bushels per acre.
New crop December 2021 corn futures have been volatile, yet range-bound over the last three months. December futures have not made a new high since May 7, when prices traded up to $6.40 per bushel. December futures have also not made a new low since May 26, when prices traded down to $5.00-1/4 per bushel. Crop conditions have stayed relatively strong across much of the Corn Belt since planting. Currently, four of the top five corn-producing states hold good to excellent ratings above 65%. The biggest area of concern is still the western Corn Belt, where some have received less than four inches of rainfall since planting. While corn condition ratings continue to hold strong for the entire U.S. in 2021, they have fallen behind ratings seen in 2020, leaving many to question the USDA’s current yield projection of 179.5 bushels per acre.
What about soybeans?
New crop soybean futures, much like corn futures, have been stuck in a sideways trading range since mid-June. November futures have not made a new high since June 7, when price traded up to $14.80 per bushel. November futures have also not made a new low since June 17, when prices traded down to $12.40-1/2 per bushel. Soybean crop conditions have fallen in recent weeks and currently sit at 58% good to excellent across the U.S. Historically, August rainfall and temperatures are the most important weather metrics when it comes to determining soybean yield. A poor start to the growing season has been salvaged before with late season rains (see 2016). Also, like corn, in six of the last seven years, the August WASDE report has brought an increase to the USDA’s national soybean yield estimate, with the average increase being 1.8 bushels per acre.
Prepare now for more volatility.
Given recent market action, no matter the change to corn or soybean yield estimates on August 12, volatility should be expected. Whether you feel under or oversold going into this WASDE report, building a strategy regardless of price action should be of utmost importance right now. These upcoming estimates from the USDA could be the nudge corn and soybean prices need to break out of their recent sideways trading ranges.
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