CHICAGO: August’s shocking US corn and soybean crop forecasts are about to be put to the test.
After a government report sent agriculture markets tumbling, projecting higher yields for America’s main crops than traders expected, grain-market watchers will be looking for a bit of ground truth.
More than 100 crop scouts will count corn kernels and soybean pods during a four-day annual tour through fields across the eastern and western crop belt in seven Midwestern states.
Traders, brokers and analysts will use the Pro Farmer Midwest Crop Tour to gauge just how much damage one of the wettest planting seasons on record has caused.
The tour will take a closer look at what actual crops look like after the US Department of Agriculture ditched the analysis of fields for its August report, relying instead on input from farmers as well as satellite data.
“What is it clear is how the late planting will impact yields particularly in our northwest Ohio, southeast Michigan and northeast Indiana dry areas,” Pat Bowe, chief executive officer of US crop handler Andersons Inc, said in a call with analysts.
“We need good growing and harvest conditions, especially in our eastern dry areas, where a lower number of corn acres were planted.”
The tour – starting in Ohio for those travelling to the eastern crop belt or in South Dakota for those taking the western route – could help prove who is on the right and wrong sides of trades.
In the week ended Tuesday, money managers cut their bullish bets on corn to an 11-week low, a move likely triggered by Monday’s biggest one-day corn sell-off since 2013 following the USDA report.
Extreme crop variability will be in focus. Fields in the eastern half of the Midwest in states such as Indiana and Illinois are in worse shape than western Midwestern states like South Dakota and Nebraska, a difference that some analysts failed to spot ahead of the USDA report.
The disparity was highlighted on Friday by Deere & Co, the world’s largest tractor manufacturer.
The crop-scouting task this year will also be made more difficult both by record amounts of acres that couldn’t be planted due to relentless rain this spring and by the delayed development of some crops.
Corn could have stunted ear growth or few kernels while soy plants may still be flowering and not yet have formed pods that will hold the beans.
Further complicating matters are slight drought conditions creeping into parts of the top corn-producing state of Iowa.
On top of that, there’s still “a long way to go” in the growing season and an early frost could still pose a risk to late-planted crops, said Deere Chief Economist Luke Chandler.
“History shows us that final yield numbers can vary relatively significantly from its August estimates,” he said, referring to the USDA.
Andersons, which is based in Maumee, Ohio, and has a large footprint in the eastern Midwest, is already forecasting smaller earnings this year compared with 2018 as volumes of both corn and soybeans where the majority of its assets are based will be “substantially lower than normal,” Bowe said.
Still, weather that allows crops to keep developing and reach higher yields could hurt still-bullish hedge funds.
Investors cut their net-long positions in Chicago corn futures by 34,994 contracts to 44,513, weekly data from the US Commodity Futures Trading Commission show.
In the past, harvest estimates from the tour generally have fallen slightly below USDA forecasts. Brian Grete, editor of the Pro Farmer newsletter and leader of the eastern half of the crop tour, hinted at what the tour might find.
With delayed plantings and dry weather, “pod counts are going to be down,” he said in a podcast. “There’s absolutely no doubt in my mind.”