USDA cuts 2021 US corn crop by 10 million metric tons, triggering bump in corn prices
The U.S. corn crop is set to exceed last year’s production, but it may not be enough to cut into rising corn prices before the end of the season.
The U.S. Department of Agriculture (USDA) reduced its projected yields for the 2021 corn and soybean crops last week, prompting an uptick in market prices for both commodities. Although both crops are expected to exceed last year’s totals, growing drought cut into the rather rosy yields USDA forecasted last spring, reducing the USDA’s anticipated U.S. corn production by more than 10 million metric tons, and soybean production by 1.8 million metric tons.
That the USDA cut corn yield projections by five bushels per acre took some by surprise, according to James Mintert, director of the Center for Commercial Agriculture at Purdue University. While private commodities analysts suspected the USDA’s previous yield estimates were too high, last week’s report cut the crop’s anticipated size far more than traders had anticipated.
The disparity between the cuts on the corn side versus soybean production could also suggest USDA will make further cuts as summer turns to fall, according to Arlan Suderman, chief commodities economist for the StoneX Group financial services network.
“USDA tends to be very conservative in changes, not one to jump the gun,” Suderman told the U.S. Soybean Export Council on August 12. “That’s what it did with soybeans because obviously August is a critical month for the size of the crop. But with corn and wheat, it got much more aggressive in what we see in making adjustments, so we might see more significant changes in September for soybeans.”
Michael Langemeier, associate director of the Center for Commercial Agriculture, also noted in a Purdue University webcast on August 13 that USDA may be holding out to change its soybean projections based on what the weather does this month. The outlook could improve with a few late-summer storms, he said, or if the weather holds, the crop might suffer.
Crop conditions also vary significantly from one location to the next, Langemeier said. While Midwestern states have seen crop yields decline by more than 10% in recent months due to drought, the Eastern Corn Belt continues to anticipate above-average yields.
The USDA reduced projected corn exports from the U.S. by 2 million tons, citing the reduced crop size rather than reduced demand, which remains relatively steady despite some uncertainty introduced by the resurgence of COVID-19 and the appearance of African swine fever in the Caribbean, according to Nathanael Thompson, an assistant professor of agricultural economics at Purdue University.
Commodity prices initially spiked after the release of the report, Thompson said, but seemed to have leveled out as of August 13, with corn futures selling for US$5.77 per bushel and soybeans for US$13.52. While there remains ample opportunity for the price of either commodity to come down by the end of the year, Thompson noted that the odds of a large decrease have fallen as the summer has progressed.
