The soybean market is anticipating that USDA will further raise its projection of the 2012 U.S. crop due to better-than-expected yields when it releases its November Crop Production Report on Friday.
Friday and Monday declines in soybean futures were largely in response to a pair of bearish private production estimates that were up 65 million and 99 million bushels respectively from USDA’s October forecast of 2.860 billion bushels. Those private estimates pegged the U.S. soybean yield at 38.6 bu./acre and 39.1 bu., respectively, compared with USDA’s October estimate of 37.8 bu.
An increase of that magnitude in U.S. production would significantly ease supply concerns, although it would likely be partially offset by a further increase in USDA’s demand projections.
Overall, trade soybean production expectations are not as bearish, averaging 2.891 billion bushels in a range from 2.720 billion to 2.959 billion, according to a survey of 21 analysts done by Dow Jones Newswires. That survey showed yield estimates averaging 39.2 bushels per acre. Trade estimates of 2012-2013 ending stocks, which average 133 million bushels, just 3 million above USDA’s October estimate, also reflect expectations for USDA to raise projected usage.
There is anticipation USDA may further raise projected U.S. exports as U.S. soybean export sales commitments are running 39.1% ahead of a year earlier, with USDA forecasting a 7% reduction in marketing year exports. Of course USDA may be cautious with further increases to its export projection given potential for a record South American crop to dominate the world market next spring and summer.
U.S. soybean yields are seen higher due to improved conditions late in the growing season. USDA’s U.S. soybean condition rating rose from 28% good/excellent at the start of September to 37% good/excellent in the final update as of Oct. 7. The improvement in conditions during the month of September was the third largest on record going back to 1986.
One reason to think USDA might not raise its soybean crop estimate substantially further in the November Crop Production Report is that its October crop estimate may have caught much of the improvement in yields. That report raised yield estimates significantly for several important producing states (6 bu. for North Dakota; 5 bu. for Minnesota, 4 bu. for both Iowa and Indiana, 3 bu. for Ohio and 2 bu. for Illinois).
The October increase in the Illinois yield looked somewhat questionable as the Illinois soybean pod count fell by 7.3% versus USDA’s September estimate and was 29.7% below a year earlier, while USDA’s Illinois yield estimate of 39 bu. was down only 17.9%. This would suggest a historically high derived soybean pod weight for the state.
