Corn and Soybean Supply and Demand and Harvest Progress Update

On October ninth the United States Department of Agriculture released their monthly crop report and latest supply and demand figures. In the October report USDA slightly increased both corn and soybean production over last month.

The October ninth crop report pegs corn production at 13 billion bushels, about 8 percent more than 2008-2009 crop. The USDA is expecting yields to be a record at 164.2 bushels per acre, up 10.3 bushels per acre over last year and up 2.3 bushels from the September report. For Kentucky, the USDA increased average yield by 2 bushels per acre from the September estimate for an average yield of 157 bushels per acre. If realized this would be a record corn yield for Kentucky.

According to National Agricultural Statistics Service (NASS) through the week of October 4th, 13 percent of the U.S. corn crop has been harvested, well behind the five year average of 25 percent. Corn harvest in states such as Illinois and Missouri are more than half behind their five year average. Corn harvest in Minnesota has just started and is just about to start in North Dakota. For Kentucky, 57 percent of corn has been harvested behind the five year average of 69 percent.

The USDA is expecting an increase in corn use over 2008. All sources of use are expected to increase, thereby increasing total use by 8 percent over 2008. In particular, exports are expected to increase by almost 16 percent over last year. Increased exports are a reflection of a weakening U.S. dollar, smaller than expected grain crop from exporting countries, and increased use by china.

For soybeans, the USDA pegs production at a record of 3.25 billion bushels, almost 10 percent more than the 2008-2009 crop. Average yield was increased by .1 bushels per acre from the September report. For Kentucky, the USDA increased the average yield by 2 bushels per acre from the September estimate for an average yield of 44 bushels per acre. For Kentucky, this year’s soybean yield would tie for the record with 2006 and 2004.

According to NASS through the week of October 4th, 28 percent of the U.S. soybean crop has been harvested, behind the five year average of 36 percent. Soybean harvest in Arkansas, Illinois, Mississippi, and Missouri are more than half behind their five year average. For Kentucky, 16 percent of the soybean crop has been harvested behind the five year average of 20 percent.

The USDA expects an increase in soybean use over 2008-2009 of almost 4 percent. For soybeans south of the equator, beginning stocks for the 2009-2010 in both Brazil and Argentina considerably lower than in 2008 due to reduced production and increased exports.

Corn and soybean prices will continue to be influenced by the size of the U.S. corn and soybean crops, the export market, and the energy industry. Producers who are undersold should be catching by selling into a rising market, which we are seeing right now in both the corn and soybean market. With a modest carry in the corn market producers should consider storing grain and selling March, May, or July futures to lock in the “carry”. This should only be done if the cost of storage is less than the amount of the carry and perceived basis increase. With little to no carry in the soybean market producers should consider selling off the combine and re-owning with the use of an option strategy. For example, sell cash soybeans for harvest delivery and buy a March, May, or July call. Cory Walters can be reached at cgwalters@uky.edu