Soybean futures soared after the US ditched hopes of a record harvest, noting damage to crops from dryness and heat, which prompted a cut to the corn production forecast too.
Soybean futures for November jumped by 5.0% to $14.83 a bushel after the US Department of Agriculture, in its monthly flagship Wasde crop report, cut by 152m bushels its forecast for the forthcoming domestic harvest.
The downgrade, which was far bigger than investors had forecast, reduced the harvest to 4.38bn bushels, stripping it of record status. The crop is now expected to be the US’s fourth largest.
And it reflected both an unexpected cut to the area estimate and a bigger-than-forecast reduction in the yield forecast.
‘Drier, hotter than normal’
The USDA, referencing “all available data” on crop area, cut its forecast for US harvested area with soybeans by 580,000 acres, to 86.63m acres.
Growers were found to have seeded less of the oilseed than had been thought in states including top grower Illinois, as well as second-ranked Iowa, and notably South Dakota, which received a 300,000-acre plantings downgrade.
The US yield estimate, meanwhile, was cut by 1.4 bushels per acre to 50.5 bushels per acre, losing it record status, reflecting worsened prospects in particular in more westerly growing states.
“Drier-than-normal… weather – accompanied by above-normal temperatures – dominated the central Plains and western Corn Belt” in August, the USDA said.
“Although less than one-fifth of the Nation’s corn (19%) and soybeans (13%) were rated in very poor to poor condition on August 28, values were considerably higher in hotter, drier areas west of the Mississippi River.”
For corn, the USDA cut its domestic production forecast for this year too, by 415m bushels to 13.944bn bushels, downgrading the harvest to a three-year low.
Again, the revision reflected reduced estimates for both area and productivity, although the yield estimate, cut by 2.9 bushels per acre to 172.5 bushels per acre, was reduced bang in line with investor forecasts.
By state, the biggest crop downgrade, of 64.60m bushels, came for Nebraska where the USDA noted that 34% of corn was rated “poor” or “very poor” as of late August.
However, the USDA also cut its forecast for use of US corn, citing “a smaller crop and higher expected prices”, with the farmgate value of the grain now expected to average $6.75 per bushel this season, a $0.10-per-bushel upgrade.
The USDA forecast for corn stocks at the close of 2022-23 – while reduced by 169m bushels to a 10-year low of 1.22bn bushels – came in close to investor expectations.
For soybeans too, the USDA noted that the US “crush forecast is reduced 20m bushels and the soybean export forecast is reduced 70m bushels on lower supplies”.
Nonetheless, the carryout soybean stocks figure for 2022-23 – downgraded by 45m bushels from last month to an eight-year low of 200m bushels – came in shy of the expectations of investors, who had expected little change to the inventory number.
The data were “bullish beans”, said Mike Mawdsley at broker First Choice Commodities.