By KARL SETZER
Market Analysis 

In a surprise move, the USDA increased the national corn yield average 2 bushels per acre to 168.8 in the August balance sheets, when most analysts had been expecting a 2-bushel decline. New-crop production is now pegged at 15.49 billion bushels, 154 million more than estimated in July.

This added production was enough to increase new-crop ending stocks 114 million bushels, for a 1.71 billion total. Old-crop corn ending stocks decreased a minimal 7 million bushels, for a 1.77 billion total.

The soybean production numbers were just as surprising for trade. The national average yield is now estimated at 46.9 bushels per acre, compared to 46 in July. New-crop demand was cut a large 50 million bushels on the export side, mainly from the heavy competition the United States has seen from South America this year.

These changes in supply and demand were enough to increase new-crop soybean carryout 45 million bushels, to a large 470 million. We did see a reduction on old-crop soybean carryout to 240 million bushels, but this was greatly overshadowed by the new-crop figures.

Some traders are already looking past these numbers and anticipating the ones that will be released in September. This is from a tendency to have more field-collected data that will be used in those crop forecasts. By the time the data are collected for the September release we may even see harvest progress in the central Corn Belt, where yields are most heavily disputed.

A few analysts are even looking past the September balance sheets in anticipation of the quarterly stocks data that will be released at the end of the month.

There is a difference in opinion on yield this year that has generated some confusion in the market. Many see the USDA yield estimates and believe these are the same thing as a trend line yield estimate. In fact, these are two separate figures.

In corn, for example, this year’s trend line yield is closer to 163 bushels per acre, which means final yield could fall below the current USDA estimate and still be above trend. The same is true on soybeans.

Even though few new cases have been reported recently, the outbreak of bird flu in the United States continues to impact the cash market. Some feeders are starting to fill their barns, but this has been a slow process.

The decline in corn demand that was generated by this outbreak is still trying to find a home in the interior market, especially in the states of Iowa and Minnesota. As a result, cash corn values have remained weaker than the remainder of the interior market.

A topic that is getting more attention is how much double-cropping we may see on soybeans this year. When soybeans rallied after the June 30 reports, it enticed farmers to consider double-cropping more soybeans on wheat acres.

Since then, the setback in futures has combined with heavy rains to limit this activity. Some analysts believe the United States may see half of the normal 5 million acres planted this year, as a result.

Trade is starting to pay more attention to long-range weather outlooks. Many analysts feel weather at this time of the growing season is the most important, as it is a major factor in crop quality, especially on soybeans. One of the most affected corn crop factors can be test weight. Trade will also get a better idea of how weather may impact the start of the harvest season in the heart of the Corn Belt.

Even though we are approaching the end of the growing season in the United States for corn and soybeans, analysts are still voicing their opinions on the weekly crop progress reports from the USDA. The greatest debate is how accurate the data really are.

The progress is one of the main contentions, as it seems crop progress makes large jumps at times. This is why many analysts and traders choose not to use ratings and progress in price discovery.

Karl Setzer is a commodity trading advisor/market analyst at Maxyield Cooperative. His commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.maxyieldcooperative.com

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate.