A monthly report from the U.S. Department of Agriculture assessing the global supply and demand of key crops had mixed messages for Midwest farmers Monday.
The World Agricultural Supply and Demand Estimates (WASDE) for August found that the number of acres of corn and soybeans farmers are on track to harvest this fall is more than earlier predictions, meaning the wet spring and late planting in some areas didn’t have as adverse an effect as USDA initially estimated.
Still, Illinois, Indiana, Iowa, Minnesota, Nebraska, Ohio and South Dakota are expected to have corn yields lower than last year and of the major corn-producing states, only Missouri looks poised to do better than last year.
Soybean yields are forecast to be a little lower than last year.
Production of both crops has been robust in recent years leading to a surplus and persistently low prices. Couple that with Monday’s demand forecast, and Iowa State University agriculture economist Chad Hart says the overall tenor of the report is negative.
Less corn will be used in ethanol production and overseas sales of both corn and soybeans will be down.
The biggest drop in soybean exports comes from the ongoing trade war with China, which has prompted other countries to ramp up production so they can step in to supply that market.
Hart said Paraguay and Uruguay are claiming a part of the market once dominated by their bigger neighbors, Argentina and Brazil. But Brazil is posing the biggest threat to U.S. soybean exports over the long term.
“The U.S. has now slid into that No. 2 spot,” Hart said, referring to the rankings of soybean producing countries. “Brazil has taken the top spot and will likely hang onto it for some time.”
Soybean prices have been stubbornly low, Hart said, but the prices farmers get for their corn had been slowly creeping up over the past couple of months.
“This report is sort of taking the air out of that recovery,” he said, adding that farmers and their communities have little reason to expect their finances to improve.
“Farm incomes are going to struggle again this year. What’s going to buoy some of these rural communities is going to be the influx of cash that’s coming from the government support as opposed to coming from the marketplace,” he said.
Iowa Farm Bureau Federation economist Sam Funk said the WASDE report also clarifies how weather challenges differently affected various states. In total, the country’s corn and soybean acres are lower than what USDA expected based on its June data. But that wasn’t true for Iowa.
“We, if you will, bucked the trend for having lower acreage,” Funk said. “In fact, we’ve got more acres planted than what USDA would have expected back in June.”
The August report is based on surveys and satellite data. Now, USDA starts sending people into the fields to add first-hand observations and calculations to its estimates that will come out in September.
There’s any number of hurdles farmers will need to clear before their crops are either stored or sold.
For example, Funk says many of the corn acres that are now included in harvest estimates were planted late and there’s not really enough information to predict how well those fields will yield. Plus, a hail storm or other major weather event in any growing region could have a big impact overall.
“If we have any sort of a(n) estimate later on that rocks those yields lower, I think it would potentially move markets again,” Funk said.
Follow Amy on Twitter: @AgAmyinAmes