Young corn

After delayed planting due to a wet spring, Iowa farmers are facing further weather challenges this summer. 

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Corn futures took it on the chin on Monday after the USDA surprised traders by increasing yield estimates.

After the USDA acreage report at the end of June came out with higher than anticipated numbers, the department called for a re-survey. Projecting 91.7 million corn acres in the June report, the USDA only trimmed its forecast by 1.7 million acres to 90 million. Meanwhile, the USDA bumped up the yield estimate to 169.5 bushels per acre, a 3.5 bushel per acre increase from the last report.

“It was a huge surprise,” Jack Scoville of the Price Futures Group said. “I don’t think anyone expected the USDA to take the yield up that much. I don’t have a problem with the area estimates, because with a re-survey they should have a good handle on those. I don’t see where they think we are getting that yield out of the crop.”

Scoville said the USDA upping the yield by 3.5 bushels took care of any lost acreage, and market traders seemed to agree, as corn futures dropped the CME limit of 25 cents.

“People just aren’t going to believe this estimate,” Scoville said. “People have to take this with a grain of salt. We can’t really say that the yield is out there. Half the crop is just blistering up. Very little of it is at the maturity level it should be for this time of year.”

Meanwhile, both soybeans and wheat saw prices fall after the USDA report.

With an updated soybean acreage number of 76.7 million acres (a 3.3 million acre decrease), the market was not hit as hard, as there was no change in projected yield (48.5 bushels per acre).

However, Scoville said rain forecasts are helping bring down the soybean futures, which traded in sympathy with the rest of the grain markets after the reports came out on Monday. He said it is far too early to make any guesses on the soybean market.

“The beans are all over the map. Some are just 6 inches high and others are 2 feet high and setting pods. It’s a crop that needs really good weather from here on out as well,” Scoville said. “The USDA really just punted by leaving the yield unchanged. They said we don’t know enough, and they are right.”

Wheat’s future contracts traded as low as 25 cents down on Monday as well after seeing increases in both production and ending stocks for this year. Wheat is expected to be at 1.98 billion bushels for production, and 1.014 billion bushels of ending stocks, both well above expectations.

This article originally ran on agupdate.com.

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