The August WASDE (World Agricultural Supply and Demand Estimates) report is always closely watched, especially with respect to corn and soybean production estimates. By August, the crop is far enough along to establish some meaningful projections for the year’s crop production. Therefore, USDA’s August WASDE projection typically serves as the benchmark for the industry’s trade.
However, there’s always uncertainty at this early stage, relatively speaking. And therein lies the challenge for the market. The industry has to grapple with accuracy of USDA’s projection in any given year.
This year’s report has attracted lots of discussion, principally about the corn yield estimate of 175 bushels per acre. That’s based on assumptions of 86.6 million acres and if realized, sets a new record. It also, if realized, will make the 2016 corn crop the largest on record at 15.15 billion bushels, exceeding the 2014 crop by 940 million bushels.
Clearly, this year’s yield estimate is significant. Specifically, 175 bushels per acre exceeds the yield trend projection by 10.6 bushels per acre, based on trendline yield at 1.83 bushels per year, and last year’s yield by 6.6 bushels per acre. Moreover, the 175 guess exceeds average trade estimates.
Given those numbers, there is some skepticism surrounding USDA’s recent projections. To that end, traders largely ignored the sizeable overage above trade estimates. And as such, the market largely shrugged off the USDA report.
So now, the industry is left in somewhat of a tug-of-war between industry guesses and USDA’s projections moving forward. How do you perceive this year’s crop? How does the corn crop look in your area? Where would you guess this year’s crop to end up? Leave your thoughts in the comments section below.
Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.
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