Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Monday 09/24/12

Sep to Oct Soybean Revisions

Soybean futures have been on the defensive over the past month with losses accelerating in recent sessions.

Much of this is tied to growing expectations that the size of the crop will increase in the October crop report vs. the 2.634 billion bushels estimated this month.

As the soybean harvest gathers steam, early yield reports are coming in well above expectations while data from the Farm Service Agency indicated that planted area is higher than the 76.1 million acre figure currently being used.

The accompanying graphic shows the percent change from the September to October crop report for soybeans in terms of production, yield, and harvested acreage with the first two on the left hand axis and harvested acreage on the right hand axis.

Though planted acreage may increase, in some areas where soybean yields are particularly bad the fields will not even be harvested so it may be that planted area increased yet harvested acreage declines.

Note that in the past three years and four of the past five harvested, soybean area has declined from the September to the October crop reports.

Still, production changes are much more closely tied to yield revisions as opposed to acreage changes.

The correlation coefficient between yield and production is 98.9% while that between production and harvested acreage comes in at 24.3%.

Though soybean yields have declined from the September to the October report the past two seasons and three out of the past four, on average yields usually increase by 0.6% resulting in output rising by an average of 0.5%.


Posted at 8:04AM CDT 09/24/12
Comments (1)
The 2011-12 ending soybean stocks were very tight. They were estimated at 130 million bushels in the September WASDE report and 169.4 million bushels in the current stocks report released September 28, 2012. The stocks report increased the ending balance 39.4 million bushels. USDA is increasing 2011-12 soybean production 37.5 million bushels, in a special update included in the stocks report, from the September production report. This will account for most of the difference. After most, if not all, the reports USDA releases, it seems like they become the whipping post for our discontent. I try to hold back, but some things just need to be pointed out. They increased production in 19 of the 31 USDA soybean growing states. It appears �strangle� that there are only increasing adjustment. One would think, maybe, one or two states would have reported production to large and have a declining adjustment. PA HA Yld Prdctn Arkansas 0 10 0.5 2,020 Delaware 0 0 0.5 84 Illinois 50 50 0.5 6,805 Indiana 0 0 0.5 2,645 Iowa 0 0 1 9,230 Kansas 0 10 0 270 Louisiana 0 0 1 980 Maryland 0 0 0.5 232 Minnesota 0 20 0.5 4,290 Mississippi 10 0 0 0 Missouri 0 10 0 365 Nebraska 0 10 0.5 2,955 New Jersey 0 0 1 86 North Carolina 0 0 0.5 680 North Dakota 0 10 0.5 2,265 Ohio 0 0 0.5 2,270 South Carolina 0 0 0.5 180 Tennessee 0 10 0 320 Virginia 0 0 1 550 Wisconsin 10 10 0.5 1,265 United States 70 140 0.4 37,492 New crop (2012-13) soybeans used in the old year (2011-12) could explain the majority of the stocks increase. (Sorry. But I'm on a roll with this theme and if it fits I�m using it.) Soybean demand was "hot" at the Gulf prior to the ending of the old year. Their basis was $0.90 to $1.20 over with bids of $18.215 to $18.515 on August 24, 2012. By August 31, 2012 - one week later - things had cooled some. The basis drop $0.15 to $0.30 per bushel to $0.75 to $0.90 over with bids $0.10 higher to $0.05 lower, ranging from $18.31 to $18.465. Any Southern production of 2012-13 soybeans that was harvested prior to year end (August 31) could have very easily been "sucked" into the export chain. Four states reported pre August 31 harvest activity: Arkansas, Louisiana, Mississippi and Texas. These states harvest something like 22.7 million bushels of soybeans by August 28, 2012. The harvested bushel climbed to 42.7 million bushels some 21.0 million bushels over the prior year when calculated from the September 4, 2012 reports. (Hurricane Isaac made land on August 28, 2012. It is assumed not much soybean harvest occurred in the old year from that date to the first September 2012 crop progress report. The bushels harvested in those September 4th reports are assumed to have occurred in the old year.) The change in ending 2011-12 soybean stocks (beginning stock for 2012-13) is a big deal with the strong demand and short supplies. If the increase occurred from missed production the "tightness" should have been alleviated to some degree. If it occurred from new production used in the old year, in part or totally, at sometime in the future those bushels will be backed back out of the 2012-13 balance sheet.
Posted by Freeport IL at 4:13PM CDT 09/28/12
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