|
"Two of the most-followed private estimates place the corn crop at
10.384 and 10.455 billion bushels, respectively, rather than the
USDA's 10.35 billion," said Darrel Good. "Two of the most followed
private estimates place the soybean crop at 2.835 and 2.84 billion
respectively, as opposed to the USDA's 2.791 billion bushels."
Good commented on reactions in the cash corn and soybean markets due
to disruptions in the Louisiana Gulf markets, with basis levels
weakening in many tributary markets. With the USDA scheduled to
release new corn and soybean production forecasts on Sept. 12, the
market focus has shifted back to crop size.
"The Sept. 12 production forecast will reflect information
available in late August and early September," Good said. "That
information includes data from a large survey of producers and data
on objective yield surveys in selected states. The data gathered in
the objective yield surveys depend on the maturity of the crop.
"For corn, kernel row length and ear diameter should be available
from most survey fields. For corn in the dent stage, weight and
moisture content of shelled grain can be collected. For mature corn,
field and lab weight of ears as well as weight and moisture content
of shelled grain can be collected."
Good noted that as of Aug. 28, 61 percent of the U.S. crop was in
the dent stage, but only 11 percent was mature. Data from a mature
crop and from harvest results will be plentiful for the October
report. Historically, the September forecast of corn production has
differed from the January estimate by an average of 4 percent, while
the October forecast has differed by an average of 2.4 percent. For
November, the average error has been only 1.2 percent.
"Early harvest results for the corn crop are extremely variable,"
said Good. "The key to the final yield estimate will be the extent
of pollination problems and average kernel weight. The warm, dry end
of the growing season in some areas suggests that weights may be
below average in those areas. The market should avoid getting too
comfortable with the September production forecast."
Similar methodology is used to forecast soybean production in
September, he added.
The objective yield survey will still rely heavily on counts of
plants, nodes, branches and pods. As of Aug. 28, only 6 percent of
the crop was mature enough to be dropping leaves.
"Data on weight of beans per pod and moisture content of soybeans
will be more abundant in the October forecast," he said. "The
historical track record for the USDA's soybean production forecast
is very similar to that for corn. The average error from 1970
through 2004 has declined from 4 percent in September to 2.8 percent
in October and to 1.5 percent in November.
"In each case, the January production estimate following harvest
was used to measure the monthly errors."
[to top of second column in this article]
 |
The average private yield forecast of 39.3 bushels per acre is
0.6 bushel above the USDA's August forecast but about 0.5 bushel
below the average suggested by the weekly crop condition ratings.
The key to the average yield will be the average weight of soybeans
per pod.
"In those areas where the growing season has ended on a warm, dry
note, weights will likely be light, particularly in the upper
nodes," said Good. "In some instances, it has been observed that
those upper pods are blank and have only one bean. In areas that are
ending the growing season under more favorable conditions, weight
per pod should be near normal. A fair amount of uncertainty about
crop size will persist until October."
Cash corn prices have declined below the Commodity Credit
Corporation loan rate, with deficiency payments reaching 37 cents in
Illinois on Sept. 6. Basis levels are generally weak in most
markets, and the spreads in the futures market are large. On Sept.
2, for example, the average spot cash price of corn in central
Illinois was 53.5 cents under July 2006 futures. If the basis
strengthens to a typical level of minus 15 cents by spring of 2006,
the market is offering a premium of 38.5 cents for corn stored for
about eight months.
"If these price relationships persist into harvest, producers may
want to consider capturing the LDP at harvest and forward pricing --
hedging -- the crop for later delivery in order to capture the carry
in the market," said Good. "Given the low level of prices, some may
also want to consider capturing the LDP and storing a portion of the
crop unpriced.
"Where storage is not available -- or is expensive
-- capturing the LDP and selling the crop out of the field might be
considered. Currently, that strategy will result in a net price
above the loan rate in some markets."
Good noted that soybean prices remain above the loan rate; basis
levels are generally weak, although a bit stronger than that for
corn; and the spreads in the futures market are modest.
"Even so, there is some return to storage being offered by the
market," he said.
The average cash bid in central Illinois, for example, is 49
cents under July 2006 futures. An improvement to minus 10 cents by
spring suggests a 39 cents return to storage over the next eight
months.
"If these price relationships persist, storing the crop under
loan on the farm and forward pricing -- hedging -- for later
delivery would capture a good deal of the carry," said Good.
"Selling some of the crop at harvest, storing some unpriced and
storing some hedged are the primary options. The portion of the crop
allocated to each option will be influenced by the portion of the
crop priced earlier in the year."
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences]
|
