The Department of Agriculture on Friday lowered its yield and production forecast for both corn and cotton, sending futures prices up for both commodities.
“The markets are in a shake-and-bake mode,” said Dan Flynn, a senior account executive for The Price Futures Group.
The September contract for corn futures on the Chicago Board of Trade closed at $6.39 and three-quarters per bushel, which is up 10-and-a-half cents from the close on Thursday. The October contract for #2 cotton closed limit up.
USDA, in its August World Agricultural Supply and Demand Estimates report, lowered its U.S. corn production forecast for the 2022-23 marketing year to 14.36 billion bushels, down from the July prediction of 14.5. That new prediction comes after USDA’s first survey-based corn yield forecast for the season of 175.4 bushels-per-acre – a 1.6-bushel drop from the July WASDE report.
“Among the major producing states, today’s Crop Production report indicates that yields are forecast above a year ago in Illinois, Minnesota, and South Dakota,” USDA said in the new WASDE report. “Yields in Indiana, Missouri, Nebraska, and Ohio are forecast below a year ago. Iowa is unchanged.”
With reductions to USDA’s new forecasts for production and exports, the department also said corn supplies will be lower. The department lowered its prediction for the 2022-2023 carryout to 1.38 billion bushels, down from last month’s expectation of 1.47 billion bushels.
Still, the world is short on corn, and Flynn says he expects USDA to raise its forecast for U.S. corn exports as early as next month. Brazil is at the tail end of its largest corn harvest for the year – the “safrinha” – and supplies are still slowly getting out of Ukraine, where a new safe-passage deal was recently struck to open up Odesa ports.
“Foreign corn production is down, with reductions for the (European Union) and Serbia partially offset by increases for Ukraine, Malawi, Russia, and Turkey,” USDA said in the report. “EU corn production is sharply lower as extreme heat and dryness cut crop prospects for Romania, Hungary, France, Italy, Spain, Slovakia, Bulgaria, and Germany.”
World corn production is now forecast at 1.179 billion metric tons for the 2022-2023 marketing year. That’s down slightly from the USDA's prediction last month of 1.185 billion, and searing heat and drought in the EU is partially to blame. EU corn production is now seen reaching just 60 million tons, according to a separate report released Friday by USDA’s Foreign Agricultural Service. That’s a 12% drop from the agency’s July forecast and a 15% drop from the previous year.
Interested in more coverage and insights? Receive a free month of Agri-Pulse!
“High temperatures during this period can lead to aborted kernels, while low precipitation and soil moisture results in small grain weight,” says FAS. “Rainfall has been well below normal in these southern regions for several months. In western areas such as Spain and France, the corn crop is two to three weeks ahead of normal due to the heat.”
Ukraine is normally a major supplier for the EU, but that situation has been complicated by the Russian invasion. The FAS, in its World Agricultural Production report, says Friday that Ukraine will be harvesting more corn than the agency expected last month because of good growing weather, but the country is still expected to produce far less this year than it normally would because of the war.
The FAS says it now expects Ukraine to produce 30 million tons of corn this year. While that’s a 20% increase from the July forecast, it would be a 13% decrease from what Ukrainians harvested last year.
“I believe there’s a global shortage and someone’s going to have to fill the void,” said Flynn.
As to cotton, USDA’s first survey-based forecast today showed production for 2022-23 down at 12.6 million bales, which would be the lowest level since 2009-10. The new production forecast is also about 19% lower than 2021-22.
USDA lowered its yield forecast to just 846 pounds per harvested acre – down from 870 last year.
USDA blamed the reduction on “historically high abandonment in the Southwest” and added that it lowered its forecast for ending stocks by 600,000 bales. The stocks-to-use ratio, USDA said, would be the lowest since the 1925-25 marketing year.
Farmers will only harvest 7.13 million acres of cotton this year, USDA said in the Friday WASDE. That’s down by about 16% from last year and Craig Turner, a senior commodities broker with StoneX Financial Inc., speculated that lost cotton acres may go to winter wheat production.
For more news, go to www.Agri-Pulse.com.
