The USDA’s most recent monthly crop production report stirred up the grain markets.
“The August crop production report almost always upsets the market one way or the other, but this was a big correction,” noted Robert Harper, grain marketing manager for Virginia Farm Bureau Federation. “Traders who speculate on the futures market follow this report very closely.”The good news is that American grain farmers are expecting a good harvest this year. The bad news is that grain prices on the Chicago Board of Trade spiraled downward.
The Aug. 10 report estimated that this year’s U.S. corn crop, while down 7 percent from last year, will still total 14.2 billion bushels. If that forecast holds, it will be the third-largest corn crop on record, following last year’s all-time record harvest. Soybean production is expected to total 4.38 billion bushels, up 2 percent from last year. Wheat production is forecast to be 23 percent below last year’s total, at 1.29 billion bushels.
As the news spread, futures market prices tumbled. Futures contracts are what farmers sign when promising delivery of a crop on a specific date—anytime from this fall into next year. Harper said prices for corn to be delivered in December dropped 15 cents per bushel in one day. Prices for November-delivery soybeans dropped 33 cents per bushel, and the price for wheat to be delivered in December went down 18 cents per bushel.
“It was a typical market reaction to a major shift in production expectations,” Harper explained. “The private sector was surprised by the USDA numbers. A larger crop means lower prices to the farmer this fall unless he or she had locked in a better price in advance.”
In Virginia, an extremely hot July affected corn production, according to Herman Ellison, Virginia state statistician for the USDA. It also put pressure on the Virginia soybean crop. “However, scattered rains in late July aided crop development,” Ellison wrote in the report. “By Aug. 6, the soybean crop condition was rated 69 percent good to excellent.”
Corn production for Virginia is currently expected to total 46.2 million bushels, 8 percent below last year’s harvest. Soybean production this year is expected to rise 1 percent from last year, to 21.8 million bushels. The winter wheat harvest is over for this year in Virginia, with an estimated total of 8.58 million bushels, 7 percent below last year’s production.
Looking ahead, Virginia cotton growers hope to harvest 155,000 bales this fall, 55 percent more than in 2016. Peanut growers also are expecting a big crop, as much as 100 million pounds—a 29 percent increase from last year’s harvest total.
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