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College of Food, Agricultural, and Environmental Sciences


Market Focus Returns to Weather, Broader Economy Following USDA Reports

September 13, 2011

COLUMBUS, Ohio – Farmers, commodity traders and market analysts will largely turn their focus back toward Mother Nature in the final weeks of the growing season following a September crop production report from the U.S. Department of Agriculture that yielded few surprises, according to Ohio State University Extension agricultural economist Matt Roberts.

“There just weren’t that many surprises in today’s report,” said Roberts, an Associate Professor in the Department of Agricultural, Environmental and Development Economics in the College of Food, Agricultural and Environmental Sciences. “The figures on corn and soybean production came in pretty much in line with our expectations.”

USDA estimated U.S. corn production at 12.9 billion bushels, up 4 percent from last year. Based on conditions as of August 1, corn yields are expected to average 153.0 bushels per acre, up 0.2 bushel from 2010, and the fourth highest yield on record.

Roberts described the estimate as the “low end of average” relative to the estimates of private analytical firms released prior to Monday’s report.

“We had analysis predicting between 143 and 153 bushels per acre, but the price action we saw in Chicago Monday said the market wasn’t surprised by the corn estimate,” he said. “The somewhat smaller crop means 400 million bushels of consumption has to be rationed.”

In estimating where those bushels would come from, USDA cut 200 million bushels from its estimates of feed usage, 100 million bushels from ethanol production, and 100 million bushels from export sales. Roberts said those estimates were all reasonably in line with his read of the corn market.

With the September report on the books, he said market watchers will quickly turn their attention back to the weather and the broader economy until the October production figures are released.

“That’s when the outlook board and the National Agricultural Statistics Service fully incorporate Farm Service Agency acreage data,” Roberts said. “We should expect an acreage cut in that report, which means there will likely be further projected cuts to consumption, also.”

In terms of soybeans, USDA reported a different picture, forecasting production at 3.06 billion bushels, down 8 percent from last year. Based on August 1 conditions, yields are expected to average 41.4 bushels per acre, down 2.1 bushels from last year.

Roberts said the soybean market, though looking at a smaller than last year, is no where near as tight as the corn trade at present.

“Soybean yields were increased from 41.4 to 41.8 bushels per acre from the previous report,” he noted. “Because of that, exports were revised higher by 15 million bushels, and inventories actually increased, where corn, even with those cuts in consumption, saw net inventories decreased.”

Roberts also pointed to South American soybean production as a mitigating factor in the psychology of soybean traders. Producers in countries like Brazil operate on a growing calendar nearly opposite that of the U.S. Corn Belt, so according to Roberts “we’re never more than six months away from more soybeans.”

Relative to market-moving factors, the arrival of cold weather is the main concern. Farmers and marketers are most concerned about and early frost because of the late maturity of the corn crop this year. Roberts said an early cold snap would further trim corn yield this season.

“The general macro economy will also drive the market, especially on soybeans, which are much more export dependent,” he said. “Exports have largely been tied to Chinese demand, which is also somewhat impacted by the European debt crisis. When people are concerned about the Euro crisis, we see weakness in soybean prices.”


Andy Vance
Matt Roberts