Farmers were expected to produce a record corn and soybean harvest this year, but after weeks of poor weather across the region, the USDA has officially walked back those predictions.
Early predictions of storm damages after a devastating derecho in early August include nearly 38 million acres of farmland impacted across the Midwest. Several states are experiencing some kind of drought, with at least a quarter of acres in Iowa and Nebraska under severe or extreme conditions.
The September World Agricultural Supply and Demand Estimates (WASDE) now expects a 387 million drop in corn bushel production this year to 14.9 billion total and 112 fewer bushels of soybeans.
Chad Hart, an agricultural economist and the University of Iowa argues that is a reasonably small drop — in the case of soybeans, less than five percent. But it could provide a much-needed marketing boost for some grain farmers.
“Anytime you're talking about a hundred million bushels, that is a big movement as far as how things adjust here in the marketplace,” he explained. “But the crop is still going to be 4.3 billion bushels strong.”
Average corn prices are up forty cents to $3.50 per bushel, with soybeans selling nearly a dollar higher than last month at $9.25 per bushel. Wheat supply and demand saw little impact. A tighter market with less supply, he says, could be a win-win. Despite lower yield estimates, the U.S. will still be able to meet Phase 1 trade deal expectations with China, Hart says.
“What we were showing was that supplies greatly exceeded the demand. Now it looks like the effects of the drought and the derecho have knocked the top off of that,” he said. “We'll have enough supply to meet that Chinese demand, but we are seeing better prices because of that.”
Farmers are still taking stock of crop damages from this year’s slate of poor weather. The USDA says it will re-run surveys in several impacted areas, which could end up dropping yield estimates again as producers across the country turn toward harvest.
“That's a unique adjustment that USDA doesn't normally make at this time of year, but it's something that we'll continue to see,” Hart said.
“So while this captured the majority of the drought and derecho impacts, it doesn't necessarily capture all of those impacts.”
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