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Yield correction is ‘large miss’

Earlier this week the U.S. Department of Agriculture revised 2018 production numbers. The U.S. soybean crop is now pegged at 4.43 billion bushels.
Earlier this week the U.S. Department of Agriculture revised 2018 production numbers. The U.S. soybean crop is now pegged at 4.43 billion bushels.

The adjusted production numbers shaved off 116 million bushels from the February estimate of the U.S. soybean crop.

“This is the largest miss by the government on record and the biggest adjustment on year-on-year acres and yield on record,” said Don Roose, president of U.S. Commodities, Inc., in West Des Moines.

The 2018 U.S. soybean crop is now pegged at 4.43 billion bushels after NASS lowered harvested acres by 500,000 and lowered yields by 1 bushel per acre (to 50.6 bushels per acre).

The Sept. 30 report lowered 2018 Iowa planted soybean acres by 50,000 (to 9.95 million acres) and harvested soybean acres by 80,000 (to 9.3 million acres). NASS lowered the 2018 Iowa soybean yield by 1 bushel per acre to 56 bushels per acre. Iowa soybean production in 2018 now stands at 550 million bushels, down 15 million bushels from the February report.

The large revisions call into question the validity of the reports, said Iowa Soybean Association president-elect Jeff Jorgenson.

“The marketing of the 2018 crop year should be virtually done, yet they’re still changing the production a year later?” Jorgenson asks. “If we can’t have accurate information, why do we have information at all?”

Updated information a year later is too late for farmers, some of whom are already harvesting the 2019 crop, says Grant Kimberley, ISA director of market development.

“Farming is hard enough,” Kimberley said. “We know everybody is trying to do their best, but it’s challenging when data is not accurate, and then it gets adjusted a year later. At that point it’s too late for a farmer to adjust; the marketing decisions have already been made.”

Grain stocks

There were 159 million bushels of soybeans stored both on-farm and off-farm in Iowa as of Sept. 1, NASS said in the grain stocks report. This was 81% above Sept. 1, 2018, inventory and the highest Sept. 1 inventory on record.

There were 913 million bushels of soybeans stored both on-farm and off-farm in the United States as of Sept. 1, NASS said. This was up 108% from Sept. 1, 2018, the report said. Though a record, it’s not as high as the 1 billion bushels once thought.

According to Kimberley, record soybean stocks are a result of several headwinds.

“The record stocks are a combination of large yields and lower exports due to the trade war and other market disruptions,” Kimberley said.

China purchased about 2.2 million metric tons (about 80.8 million bushels) of soybeans during September. More purchases are always welcome, Kimberley says. The United States needs to capture 92% market share of the rest of the world to offset what’s been lost due to the impasse with China.

Passage of an extension of the biodiesel tax credit and a reallocation of lost gallons of biodiesel as a result of small refinery exemptions would also improve demand and chip away at the large supplies of soy.

Things to watch

Roose said the market would continue to monitor yields as this year’s harvest begins. Eyes are also on South America as they begin planting their fields—they raise a soybean crop 1.5 times the size of the United States’ soybean crop.

Trade talks are set to resume between the United States and China Oct. 10. The markets will continue to react to those negotiations, Roose said.

A price rally in the soybean market means farmers should evaluate their current marketing plans, Roose said. November soybean prices were up 20 cents following the report of fewer soybean stocks. Prices have continued to close above $9 per bushel since then.

“Everybody has their situation, but when you get a price rally like this you have to look at your break-evens and start to figure what you want to do,” Roose said. “At the same time, you have futures prices around $9.60 per bushel, so you also have to do some proper risk management for yourself.”

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