Column: Sinking demand combats shrinking U.S. soy crop as trade nails corn yield

An aerial view of a combine harvester as it harvests soybeans in Deerfield, Ohio, U.S., October 7, 2021. Picture taken with a drone. Picture taken October 7, 2021. REUTERS/Dane Rhys

NAPERVILLE, Ill., Oct 12 (Reuters) - The often surprising nature of the U.S. Department of Agriculture’s crop reports delivered on Wednesday as U.S. soybean yield fell below most industry estimates, though cuts to export demand and increased international competition minimized the impact of a smaller crop on the U.S. balance sheet.

U.S. corn yield is now nearly 10 bushels per acre lower than the earliest projections, though the trade has anticipated that decline very well. Analysts have nearly nailed the last two corn yield estimates, their best-known performance for these months.

USDA pegged U.S. soybean yield at 49.8 bpa Wednesday, lower than 50.5 last month and the trade guess of 50.6, cutting U.S. soybean production more than 3% from 2021 to 4.3 billion bushels.

Back in May, initial soybean harvest expectations were about 325 million bushels larger on 3.5 million more planted acres. That is the fourth-largest crop disappointment from May to October in the last 20 years (behind 2019, 2003 and 2012).

Chicago November soybean futures popped on Wednesday, though they are averaging $13.75 per bushel this month versus their $15 May average, despite tighter 2022-23 supply projections now versus then. Demand doubts have crept in with low Chinese participation and a possibly huge Brazilian soy crop on deck.

USDA on Wednesday morning announced China had purchased 526,000 tonnes of U.S. soybeans for the current marketing year, the largest daily sale of the U.S. oilseed to any destination since June 11, 2020.

But this sale alone is not necessarily game-changing unless more bookings arrive soon. China’s U.S. soybean purchases during the current week have often ranged between 1 million and more than 2 million tonnes.

The smaller U.S. soybean crop outweighed both higher carry-in stocks and lower export demand than last month, and the 2022-23 ending stock projection came in at 200 million bushels, the same as last month.

YIELD TRAJECTORY

There have been three other years in the past 20 years where U.S. soybean yield is lower in both September and October: 2019, 2008 and 2003. The two most recent times, final yield was higher than in October.

When considering all of the past 20 years, U.S. soybean yield in January was lower than in October eight times. But the final yield – set months later after USDA conducts its stocks review – was lower than in October only five of the last 20 times.

The objective yield data showed that 42% of USDA’s soybean field samples were mature during the October observation, the second-lowest of the latest six years. But maturity level did not seem to indicate in the past to what extent final yield would differ from the October estimate.

USDA’s corn yield of 171.9 bpa, down from 172.5 last month and just above the trade’s guess of 171.8, was heavily influenced by drought in the U.S. Plains. Nebraska’s yield estimate is the worst since 2013, and ten-year-low readings are pegged in South Dakota and Kansas.

Drought years can bring a higher level of abandoned corn acres, though a falling yield by itself is not necessarily indicative of more abandonment to come. Nationally, USDA says 91.2% of corn plantings will be harvested for grain, equal to the five-year average and above 2012’s 89.8%.

This is the third month in a row where USDA’s corn yield is lower than in the previous month. The last two times that happened were 2012 and 1993, years of drought and flood, respectively. Yield increased in the subsequent 2012 reports, but the 1993 yield fell further in both November and January.

In the last 20 years, U.S. corn yield was lower in both September and October four other times, most recently in 2020. Final yield was higher than in October in two of those years, but by less than 1%.

USDA had preliminarily pegged 2022 U.S. corn yield at 181 bpa, though its first official trend yield came in at 177, adjusted lower because of the slow planting pace.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

Editing by Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Thomson Reuters

As a columnist for Reuters, Karen focuses on all aspects of the global agriculture markets with a primary focus in grains and oilseeds. Karen comes from a strong science background and has a passion for data, statistics, and charts, and she uses them to add context to whatever hot topic is driving the markets. Karen holds degrees in meteorology and sometimes features that expertise in her columns. Follow her on Twitter @kannbwx for her market insights.