Takeaway

The presenter argues the USDA's September corn yield estimate of 178.5 bu/ac is likely too high and may see future downward revisions. Their internal calculation suggests a yield closer to 173.3 bu/ac, which, combined with a sub-10% stocks-to-use ratio, points to a tightening U.S. balance sheet. For wheat, the speaker believes high prices are a key driver that will lead to a significant increase in U.S. planted acres.

What the presenter said

• The USDA cut its corn yield estimate to 178.5 bushels per acre, slightly above the average trade forecast of 178.1 bu/ac. [00:34]
• Pro Farmer's internal calculation, using a 10-year average ear weight, points to a potential corn yield of 173.3 bushels per acre, well below the USDA's figure. [03:00]
• The U.S. new crop corn stocks-to-use ratio is now below 10%, which the presenter considers an "eye-opening" level of tightness. [09:23]
• This year's corn harvest is forecast to be about 1.2 billion bushels smaller than last year's record. [06:00]
• Global corn stocks are projected to tighten, falling by 25 million metric tons from last year's 300 MMT level. [06:10]
• In wheat, the presenter expects high prices to be the primary factor driving an increase in U.S. plantings, potentially by a couple of million acres. [19:51]
• USDA unexpectedly increased its soybean yield estimate, despite lower pod counts observed versus a year ago. [10:44]

Trade ideas

• None stated. The presenter did not put forward an actionable trade idea but outlined a market view that U.S. corn yields may be overestimated by the USDA, while high prices are likely to incentivize an expansion of U.S. wheat acreage.

Levels and data cited

• Price Levels:
  • Soybeans: $13 is cited as a key pivotal moment for selling pressure.
• Data Cited:
  • USDA Corn Yield: September estimate cut to 178.5 bu/ac.
  • Pro Farmer Corn Yield: Internal estimate is 173.3 bu/ac.
  • USDA Corn Production: September estimate is 15.8 billion bushels.
  • USDA Implied Ear Weight: 0.346 pounds/ear for the current year, the second highest on record.
  • Global Corn Stocks: Forecast to be 25 MMT lower than last year's 300 MMT.
  • Global Wheat Trade: USDA lowered its figure by 900,000 metric tons, citing reductions for Russia, Ukraine, and others.

Risks and what would invalidate this

• The presenter notes that the USDA's corn yield estimate may be too high, as it relies on ear counts rather than actual, smaller-than-expected ear weights observed on crop tours.
• The sustainability of the U.S. soybean export pace is uncertain due to global competition and China's purchasing behavior.
• The full impact of the Russia-Ukraine conflict on Black Sea wheat supply may be underestimated by the USDA.
• A general market risk was noted: prices that have risen exponentially tend to correct hard, indicating a potential near-term top.