Fundamentally Speaking

Joel Karlin
DTN Contributing Analyst

The USDA’s Long-Term baseline assumptions were released February 13th showing the department’s take on the supply-demand situation for the major grain and oilseeds going out to 2023.

This report was prepared between October and December so some of the information used to compile this report was somewhat dated.

For this reason, the markets usually do not pay these baseline assumption numbers much heed especially with the more up to date Ag Outlook session figures usually released just a week later and these are more reflective of the current USDA thinking.

Nonetheless, the yield forecasts are informative in that they have not deviated much from what the USDA indicates at their annual Ag Outlook Forum grain and oilseeds presentation.

The accompanying graphic shows the change for prospective corn, soybean, and wheat yields in bushels per acre from the release of the Long-Term baseline assumptions to what the USDA indicates in their outlook sessions.

If history is any guide, next week the USDA should estimate the prospective 2014 2014 U.S. corn, soybean, and all wheat yield at respectively 165.6, 45.2, and 45.8 bushels per acre.

For corn and soybeans, if achieved these would be new record high yields. The 1999-2013 average difference between the baseline numbers and the Ag Outlook figures are zero for corn and soybeans while the Ag Outlook wheat yield averages 0.3 bushels per acre under the baseline figures.

As opposed to corn and soybeans, the USDA has at least updated winter wheat conditions to guide them on wheat yields.

The 2014 wheat yield is below last year’s 47.2 and the 2012 figure of 46.3 perhaps reflecting the recent downgrading of this year’s winter wheat crop.

If the USDA uses the 165.6 and 45.2 bushel per acre yield combined with expected large planted acreage projections, trade expectations for bearish balance sheet figures may not be too far off the mark.

(KA)