USDA on Hiatus, FBN Yield Data Suggests Production Changes Could Be Looming
The USDA was supposed to release their final 2018 crop estimates on Friday, but thanks to the government shutdown the big reveal is postponed. The January report is the final production estimate for the 2018 crop year, and while it serves as a bookend to the growing season, it tends to have few revisions that are market shattering.
Going into the report, traders look for a slight downgrade in acres and yield for both corn and beans. The poll results based on a Thomson Reuters survey of analysts are listed below. Overall, traders look for a minimal decline in soybean production of 28 MB and corn of 88 MB. Hardly game changers to the balance sheet.
Historically, USDA does not have a definitive trend toward adjusting yield or acres either up or down. There is a very modest, but statistically insignificant tendency to see lower acres and yield in the January report (see the charts below ).
During the growing season, we have been providing updates from FBN yield data. As we close out the 2018 growing season, FBN yield data continues to trickle in with current representation of 2% to 3% of acres in some states. Please note that the sample size of FBN yield data is still very small and may not be representative of U.S. farmers as a whole.
For corn, FBN farmer-contributed data is not noticeably inconsistent with USDA yield forecasts. If we look at the percentage change in USDA yields from 2017 to 2018 and compare that to FBN yield data percent change between 2017 and 2018, we see similar qualitative magnitudes. Wisconsin and Kansas are the two states in the below results that show disagreement in the direction of yield from last year to this.
However, there are some tendencies for FBN yields to not be as optimistic as USDA figures. For eight out of the 11 states listed below, FBN yield results are lower in percent increases than USDA. The only states that show FBN yield increases bigger than USDA are KS, ND and NE.
FBN soybean data, however, tells a different story. Here we see yields coming in better than USDA figures from their November results. However, the differences seem pretty negligible for most key states except Iowa.
Here, FBN yield data is up 8.3% from last year, while USDA looks for only a 1.8% increase.
There would seem to be a compelling argument that USDA may find a lower corn yield in their final estimates. The current yield stands at 178.9 but, given the data from FBN farmers, we think there is a decent chance that final yields come in between 177 and 178, which would be in line with average estimates of 178. While this may seem bullish, we think that any downward revision in U.S. corn yield will be met with a likely reduction in demand side numbers (something the trade is not factoring in as polls show carryout numbers expected to decline by as much as the expected production change).
For soybeans, our bias is a slight uptick in USDA yields which currently stands at 52.1. If we had to guess, we would think a 0.1 to 0.3 bushel upgrade. If so, this would be shrugged off by the market, so we see no big price adjustments for beans. It continues to be a story of huge carryouts and not enough demand to absorb the surplus.
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