USDA sees record-high 2020 U.S. corn, soybean yields

The U.S. 2020 corn and soybean crops will be bigger than previously thought, USDA reports.

On Wednesday, the USDA released its August U.S. Supply/Demand and World Production (WASDE) reports at 11:00 a.m. CT.

Initially, the CME Group's farm markets mostly dipped. Following the report, corn moved up ¼¢, soybeans down 3¢, and wheat dropped too.

At the close, the Sept. corn futures finished 3¢ higher at $3.14 1/2. Dec. corn futures finished 3 1/4¢ higher at $3.27 1/4.

Sept. soybean futures settled 10¢ higher at $8.80 1/2. November soybean futures closed 9 1/2¢ higher at $8.83 1/2.

Sep. wheat futures ended 3 3/4¢ lower at $4.91 3/4.

Sep. soymeal futures settled $0.10 per short ton higher at $284.20. Sept. soy oil futures closed $0.94 cent higher at 31.56¢ per pound.

In the outside markets, the NYMEX crude oil market is $1.11 per barrel higher at $42.72. The U.S. dollar is lower, and the Dow Jones Industrials are 288 points higher.

U.S. Production

In its report, the USDA pegged the U.S. average corn yield at 181.3 bushels per acre vs. the average trade estimate of 180.5 bu./acre and the USDA's previous estimate of 178.5 bu./acre.

The U.S. corn production estimate came in at 15.27 billion bushels vs. the trade's expectation of 15.17 billion bushels and the USDA's July estimate of 15.0 billion bushels.

For soybeans, the U.S. 2020 average yield estimate is pegged at 53.3 vs. the trade's expectation of 51.2 bu./acre and the USDA's July estimate of 49.8 bu./acre.

The U.S. soybean output is pegged at 4.42 billion bushels vs. the trade's expectation of 4.2 billion and the USDA's previous estimate of 4.13 billion.

If realized, these yields would set all-time high records for corn and second largest for soybeans.

U.S. Ending Stocks

On Wednesday, the USDA estimated the U.S. corn old-crop ending stocks at 2.22 billion bushels vs. the trade's expectation of 2.26 billion and the USDA's July estimate of 2.24 billion.

For old-crop soybeans, the USDA pegged carryout at 615 million bushels vs. the trade's expectation of 618 million and the USDA's July estimate of 620 million.

2020/2021 U.S. Ending Stocks

The USDA sees the U.S. corn ending stocks at 2.75 billion bushels vs. the trade's expectation of 2.82 billion and the USDA's previous estimate of 2.64 billion.

For soybeans, the new-crop ending stocks are estimated at 610 million bushels vs. the trade's expectations of 526 million bushels and the USDA's July estimate of 425 million.

The U.S. 2020/2021 wheat ending stocks are pegged at 925 million bushels vs. the trade's expectations of 948 million and the USDA's July estimate of 942 million.

Trade Reaction

Britt O'Connell, Cash Advisor for Commodity Risk Management Group, says that the report's data is not causing much volatility in the markets.

"Despite higher ending stocks projected for 2020/21 corn and soybeans both markets are trading higher. The U.S. corn crop is expected to increase to 15.3 billion bushels with an increase in yield to 181.8 bpa. A portion of the production increase was offset by larger projected feed usage and exports; however, ending stocks are still increased to 2.8 billion bushels.

O'Connell added, "With lower prices and weakness in the dollar U.S., corn will likely continue to remain competitively priced. Soybean yields were increased to 53.3 bpa, pushing ending stocks to 610 million bushels. U.S. crush and exports were revised higher. Despite the bearish numbers the market is moving higher, indicating that the numbers published were within the expectations of the trade."

Jack Scoville, PRICE Futures Group, says that the report was negative fo prices.

"The USDA estimated the crops every bit as high as had been forecast by the trade. Also, in line with most trade expectations were ending stocks levels and South American production estimates. So, we got a little relief bounce after the release of the report, but the overall bearish sentiment and numbers are keeping prices generally weak. The trade will now expect the production estimates to increase in coming reports. So, prices could stay generally weak," Scoville says.

Sal Gilbertie, Teucrium Trading, says that today's USDA report is being ignored.

"The USDA has a habit of overestimating yields in the August report, and with Monday's intense storm damage still being assessed the blockbuster yields in today's report are being largely ignored. Most of the trade will wait to see what weather damage actually occurred, and all eyes will be on Chinese buying, which has been robust the past several weeks. What would have been a bearish report has been overwhelmed by extraneous factors, and the markets are holding up well post-report," Gilbertie says.

Jason Roose, U.S. Commodities, says that this August report is different than last year's.

"The difference is that the expectations for an increase in yield, production and carry out for corn and soybeans eliminated any shock this year, with increased yields for corn of 3.3 bushels and a 3.5 bushel soybean yield. Plus, production increases in both corn and soybeans left very little bullish surprises on this report. But, key to the numbers released today is how much of the premium is dialed in. With 2019 world ending stocks lower than expected for corn and soybeans, combined with the weaker dollar, that scenario could offset larger ending stocks," Roose says.