Farmers are on track to see the second highest corn yield on record and harvest their third biggest crop ever, the Agriculture Department said in a report that surprised traders and sent market prices falling.
USDA's August Crop Production Report, the first of the season based on sampling crops as well as surveying farmers, estimated the average corn yield at 169 bushels per acre. The average soybean yield was forecast at just under 47 bushels an acre.
A second report, World Agricultural Supply and Demand Estimates (WASDE), was also bearish not only on domestic production, but also international carryover, projecting large figures in several commodities.
U.S. ending stocks for corn are projected to be 114 million bushels higher and soybean ending stocks are up 45 million bushels at 470 million. Globally, ending stocks for corn are projected up 5 million metric tons, up 1.7 million metric tons for wheat, but dipped down 5 million metric tons for soybeans.
Markets reacted by dropping the Chicago Mercantile Exchange December 2015 corn price 19.5 cents to $3.68 per bushel and the November 2015 soybean price 61.5 cents to $9.10/bu.
USDA lowered its estimate of the average price for this year's corn crop by 10 cents a bushel to $3.65 per bushel.
The crop report "was a 180 from what the trade was looking for," Don Roose with U.S. Commodities Inc. told Agri-Pulse. "The trade was actually looking for lower yields on corn and soybeans going into this report."
Overall, corn production is forecast at 13.7 billion bushels, down 4 percent from last year's record, on 81.1 million acres.
John Anderson, deputy chief economist with the American Farm Bureau Federation, said the yield projections were a departure from widely held projections.
"There's a big swing not just from where we were last month but really from where expectations were going into the report," Anderson said. "It was a pretty big discrepancy, and that's obviously a pretty bearish factor."
Roose said the report demonstrates that good conditions in the western Corn Belt may be enough to offset the poor conditions in the eastern Corn Belt, where USDA designated 53 counties as primary natural disaster areas today due to excessive rain and flooding in early May. The announcement also included 60 contiguous counties in Indiana, Illinois, Kentucky, Michigan and Ohio.
Soybean production was forecast at 3.92 billion bushels, a 1 percent drop from last year despite a record forecast acreage of 83.5 million acres, up one percent from 2014.
The estimate for total wheat production was down from the July but 5 percent higher than 2014 at 2.14 billion bushels.
Cotton production is expected to drop 20 percent this year, a result of many producers moving to more profitable crops.
Click here to see more...