 
SEPTEMBER 7, 2004
HOW LARGE IS THE U.S. SOYBEAN CROP?
Last month, the USDA forecast the 2004
U.S. soybean crop at 2.877 billion bushels, 459 million larger
than the 2003 crop and only 12 million less than the record
crop of 2001. That forecast was based on a survey of farmers
and on some field observations of crops in the seven largest
producing states in late July/early August. The forecast assumed
normal weather conditions for the remainder of the growing
season.
The crop forecasting process has been repeated for the report
to be released on September 10 and will be conducted again
for the October and November forecasts. Monthly forecasts,
relative to the final estimate made in January following harvest,
generally become more accurate in later months of the forecasting
cycle as more information is available. Anticipating the September
forecast this year is made difficult by the diversity in reported
crop conditions and by the wide range in crop maturity. The
USDA's report of crop conditions for the week ended August
29 showed the poorest crops to be in Louisiana, Michigan,
Minnesota, North Dakota, Ohio, and Wisconsin. Relative to
the five year average, crop maturity was latest in Kansas,
Michigan, Minnesota, the Dakotas, and Wisconsin. In general,
however, August weather conditions were favorable for much
of the crop in the Midwest and harvest of early maturing varieties
is underway.
For much of the past month, the soybean market focused on
the lateness of the crop in northern growing areas and the
private forecasts of an early freeze that could damage much
of that crop. November 2004 soybean futures moved $.30 higher
(closing at about $5.85) following the smaller than expected
August production forecast and then traded to a high of $6.52
on September 1. The market focused on crop concerns in northern
growing areas and appeared to ignore the potential impact
of favorable weather on crops in the middle of the country.
Now, forecasts of imminent frost have disappeared and the
National Weather Service forecast for the period September
12 through 16 calls for above normal temperatures in most
of the northern growing areas.
While harvest is well underway in some southern areas and
will be progressing rapidly in the lower Midwest, considerable
uncertainty about crop size will persist beyond the USDA's
September forecast to be released this week. Current crop
condition ratings, however, suggest that there is potential
for the U.S. average yield to exceed the USDA's August forecast
of 39.1 bushels per acre. As of August 29, 64 percent of the
U.S. crop was rated in good or excellent condition, well above
the 45 percent of a year ago. Based on the relationship between
crop condition ratings at the end of the season and the average
yield over the past 18 years, current crop condition ratings
suggest a 2004 average yield of 41.2 bushels per acre. It
is likely that crop condition ratings will continue to decline.
The percentage of the crop rated good or excellent, however,
would need to decline to 53 percent for historical relationships
to point to a yield of 39.1 bushels. While the past relationship
between reported crop conditions at the end of the season
and yield is fairly strong, the "fit" was weak in
some years. Crop condition ratings do not provide a complete
indication of yield prospects, but have been a reasonable
guide.
An average yield of 41.2 bushels per acre, without a change
in the estimate of harvested acreage, would result in a 2004
U.S. soybean crop of 3.035 billion bushels. If the percentage
of the corp rated good or excellent declines another 5 points,
a yield of 40.2 bushels and a crop of 2.96 billion bushels
would be projected by past relationships. A crop of that size
would likely be enough to push prices back to the early August
lows, and probably even lower.
With the change in frost prospects, November 2004 soybean
futures traded back to the $5.80 level early on September
7. For the moment, prospects for an abundant harvest are still
in place, but prices may continue to be a bit volatile as
the growing season winds down and yield reports filter into
the market. Once the U.S. growing season is completed, the
market will turn more attention to Chinese demand and South
American crop prospects. Forecasts of Chinese imports are
fairly aggressive and most analysts continue to report prospects
for a significant (7 percent) increase in soybean area in
Brazil. Some concern about the South American crop may be
needed to keep prices from moving lower this winter.
Issued by Darrel Good
Extension Economist
University of Illinois
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