Summary

• cmdty accurately anticipated revisions from the USDA yield and released new production and area harvested forecasts for corn and beans
• Current yield forecasts for corn at 178.4 are inline with USDA, and beans at 50.5 are 2.7% lower than the USDA’s September WASDE report
• New production forecasts from cmdty show impacts from the midwestern derecho on overall supply - corn may see upside to USDA production forecasts, but beans could continue lower

September WASDE Post-Mortem & New Production Forecasts

Last Thursday we held our September WASDE preview livestream and soft launched cmdty’s new US grain production forecasts to the public. These brand new data products were designed to compliment our yield forecast indexes and provide users with a complete picture of the supply side of U.S. grain.

The timing of the release couldn’t have been any better, as the ground truth - which we uncover by applying machine learning to satellite imagery - indicated that the USDA was due for a sharp revision down on generally optimistic expectations and August’s derecho. This generally aligned with market expectations, which had been pricing in a supply side retrenchment going back to the arrival of the derecho - which was evident in the meaningful increase in corn and bean prices that took place from mid-August through to the release of September’s WASDE report.

CBOT Corn Price

In fact, a brief dip in CBOT Corn was observed in the minutes immediately following the WASDE release - suggesting that the expected drawdown in supply wasn’t as dramatic as some market participants had been anticipating.

While there is no doubt that the midwestern derecho played a factor in the USDA’s revision, it’s important to note that our yield forecasts for corn and beans have been consistently under the USDA’s outlook throughout the growing season, with beans remaining 2.7% below the USDA’s forecast. As it currently stands we are anticipating end-of-season yield for corn and beans at 178.4 bu/ac and 50.5 bu/ac respectively.

U.S. Yield Estimates for Corn and Beans - bu/ac

Supply Expectations for Corn and Beans

Looking at the overall picture for supply, the story is a little more complex than a cursory review of yield expectations would indicate. Specifically, there is a meaningful difference between our expectations for acres harvested (84.7m acres for corn) and what the USDA is expecting (83.5m acres). Similar differences in harvestable acreage can be seen in the September production estimates from Indigo Ag - where they project 500-600k more acres than what the USDA is forecasting. This suggests that there could be upside to production and potentially some downside to price as we head into harvest.

For beans, it all comes down to yield. Market expectations for harvested acreage are relatively inline, but there still is a fairly meaningful delta between the latest WASDE yield figures and what our geospatially derived ground truth is telling us. A slight pullback in supply expectations could be in store for beans over the coming months.

Taking this overall picture of supply into account and in the context of our basis forecasts, clients are well positioned to optimize their grain marketing strategy based on both price and basis expectations going forward. All cmdtyView Pro users and any yield forecast data clients get access to the new production forecast data, with daily updates, for free as part of their current subscription. We also make national and state-level forecasts available twice monthly for free through our revamped US Crop Production Report.

A Sneak Peak on Product Development

We are constantly adding more data and content to all of our products as we are focused on providing more value to our clients through the services they already receive from us. Doing right by our clients is just something we believe in and it’s built into what we do every day.

As we head towards Q4 2020 and 2021 nothing is changing on our side. In fact, we’re focused on scaling our capabilities with geospatial intelligence and insights even further. We’ll be releasing a similar suite of products for other grain growing regions throughout the globe, with an initial focus on our northern neighbors from Canada. This is in addition to enhanced capabilities around cropland classification and more granular advanced weather factors - all of which can help clients build amazing products or perform analysis more easily than they thought possible.