(Wall Street Journal) – U.S. farmers are expecting a record corn harvest this year alongside more soybean supplies, though the market impact will likely hinge on yield and export demand expectations to be detailed in a government report due Friday.
The U.S. Department of Agriculture is expected to raise its estimates for U.S. corn production and yields, though global stockpiles are expected to tick down slightly, according to analysts surveyed by The Wall Street Journal.
The latest monthly update on crop supply and demand is viewed by traders as the one of the most important of the year because it incorporates surveys of maturing plants from 23,000 farmers at a crucial time in the growing season.
Corn futures have slumped 24% from their June peak and soybeans are 17% lower as clement growing weather offers the prospect of a huge new crop adding to abundant global supplies at a time when end-use demand has tempered.
Crop conditions have continued to trend above average during the most critical part of the U.S. growing season, with eastern regions faring generally better than western areas in a reverse of last year.
The closely watched report incorporates conditions in overseas markets and will likely have ripple effects across sectors including food production, farm equipment and transportation.
Federal forecasters are expected to peg domestic corn production in 2016 at a record 14.784 billion bushels, up from a July outlook of 14.540 billion, according to the average among polled analysts. The government likely will project yields at 170.8 bushels an acre compared with 168.0 bushels in July, analysts said.
The agency likely will project soybean output at 3.949 billion bushels compared with 3.880 billion a month earlier. Yield is expected to climb to 47.6 bushels an acre from the agency’s 46.7-bushel estimate in July, according to analysts.
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“We’re pretty focused right now on yield,” said Jason Clapp, vice president agricultural consulting at Risk Management Commodities Inc. in Chicago.
Abundant stocks of wheat, which faces competition from corn as an animal feedstock, are expected to climb further. Analysts expect production of 2.269 billion bushels compared with the 2.261 billion forecast in July.
A run of 10 straight days of soybean export sales to China from the U.S. alongside shipments to Mexico has also lifted expectations that usage numbers could come down, tempering the ending stocks that have cast a shadow over the market in recent weeks.
Domestic corn stockpiles at the end of the current season on Aug. 31 likely will total 1.720 billion bushels compared with July’s estimate of 1.701 billion bushels. For the season that ends August 2017, inventories are expected to rise to 2.287 billion bushels from the 2.081 billion forecast in July.
U.S. soybean reserves are expected to decline, however, with analysts anticipating the USDA will project domestic stockpiles at 328 million bushels at the end of the coming August, down from the government’s month-ago estimate for 350 million. Inventories the following year have ticked up again after July’s decline at 323 million bushels compared with 290 million in the prior period.
Global corn stockpiles in the 2016-17 season will likely total 211.8 million metric tons, up slightly from July’s estimate. World soybean inventories will probably drop from this year to 67.4 million tons, slightly above July’s estimate.
Analysts expect the USDA to forecast total U.S. wheat production in 2016-17 of 2.269 billion bushels, which is up from 2.052 billion bushels harvested last season and also a slight increase from the government’s July outlook.
Good weather during the spring and a rally in agricultural commodity prices following problems with the South American harvest prompted growers to ramp up plantings this year.
Many domestic farmers are grappling with the fallout from three years of declining crop prices and trying to grow their way out of the industry’s slump, even as farm income is expected to drop for a third year, with the forecast $54.8 billion less than half the record in 2013.
Abundant feed supplies have also filtered through to livestock markets, with herds expanding before dollar strength crimped export demand and pressured prices.
