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August 19, 2015

Reaction to the August Crop Report

The August Crop Report is always a hard report to forecast in advance and that turned out to be the case again this year. The estimates came in bigger than anyone had anticipated and my feeling is that these numbers may end up being the highest of the year. As a reminder, my estimates are always based on what I think the crop production will be at the end of the growing season. I do not try to mimic the USDA estimates in their monthly reports.

Corn - The August Crop Report indicated that the 2015 corn production would be 13.68 billion bushels on 81.1 million harvested acres with an average yield of 168.8 bu/ac, which would be the second highest corn yield on record for the United States. Ten states are expected to have record high corn yields in 2015. Below are my comments on the corn estimate.

Ear size - For the August Crop Report, NASS enumerators count the number of corn plants, the number of ear shoots, and the number of ears in their plot area. They then anticipate that each of those plants will go on to produce a normal size ear. They indicated that the number of ears was the second highest on record for the combined 10 objective yield states, but they did not say anything about the ear size. Therefore, when they combine the high number of ears and an average ear weight, the model produces a big yield estimate.

The problem I have with this is that I do not think the ear size in the eastern Corn Belt will end up being average. Additionally, there are a lot of antidotal reports from Iowa and Minnesota that indicate that farmers are finding that the ears in their fields are smaller than anticipated given the good weather this summer. It's hard to know what farmers had anticipated, but the ear size in the western Corn Belt is something that needs monitoring.

July weather - NASS indicated in June WASDE report that "more than 90% of yield variability for corn is determined by July weather." In the July WASDE report they stated "Projected corn yield based on a weather adjusted trend model and assumes normal July growing conditions." It turned out that the weather during July was better that normal in many locations with ample moisture and below normal temperatures. Certainly there was a lack of any extreme heat during July. Therefore, I think the good weather during July skewed the model to the up-side.

Corn harvested acreage - The corn harvested acreage is estimated at 81.1 million acres which is the same as in the June Planted Report. If verified, then the harvested acreage would be 91.2% of the planted. There are a lot of holes in the corn fields of the eastern Corn Belt, so I think 91.2% harvested is too optimistic. It certainly does not look like they accounted for all the drowned out spots in the eastern Corn Belt. Therefore, I think the corn harvested acreage could still decline in future reports. The corn harvested acreage number probably bothered me more than the higher than expected yield estimate in the report.

Corn summary - For the reasons stated above, I feel the corn production estimate was overly optimistic and it could end up being the highest estimate of the year.

Soybeans - The August Crop Report indicated that the 2015 U.S. soybean crop would be 3.91 billion bushels on 83.5 million harvested acres with an average yield of 46.9 bu/ac. If realized, the estimated yield would be the second highest on record with record high yields in 8 states (Arkansas, Georgia, Kentucky, Michigan, Minnesota, Nebraska, South Dakota, and Virginia).

Soybean yield - On August 2, 63% of the soybeans were rated as good to excellent, which was 8% below the same time last year, yet the yield estimate is only 0.9 bu/ac below last year's final yield (47.8 bu/ac final yield in 2014 vs. 46.9 bu/ac in August 2015). With all the shorter-than-normal soybeans in the eastern Corn Belt as well as in Missouri, I feel this yield estimate is overly optimistic.

July weather - My thoughts on the July weather are the same as what I mentioned above for the corn. I think the good weather during July and lack of extreme heat skewed that part of the model to the up-side. We all know that August is the make-or-break month for soybeans and the weather during the first half of August has been somewhat dryer than normal.

Soybean harvested acreage - The soybean planted acreage was estimated at 84.3 million acres or down 800,000 acres from the 85.1 million acres estimated in the June Acreage Report. That reduction was justified given the problems in getting the crop planted. The harvested acreage was estimated at 83.5 million acres which is 99.05% of the planted acreage. If verified, that would indicate 800,000 failed acres of soybeans. It appears that they did account for some of the failed acres in the eastern Corn Belt, but I think they are still a bit too optimistic.

Soybean summary - I think the soybean yields were overstated as well. The soybean yield was estimated at 46.9 bu/ac, which is just slightly less than a record yield. To achieve a record nationwide yield, everyplace needs to do really well and I do not think that is the case this year especially in the eastern Corn Belt. They estimated that eight states will have a record high soybean yield, but only three of those states are major soybean producers (Minnesota, Nebraska, and South Dakota).