November 9, 2009

Anecdotal reports of better-than-expected yields across the Midwest have most analysts surveyed by Dow Jones Newswires anticipating a modest increase in Tuesday's (November 10) US Department of Agriculture 2009 soy crop production estimate.

 

On average, 24 analysts participating in a Dow Jones Newswires survey projected a crop size of 3.269 billion bushels with a yield of 42.7 bushels per acre. The averages ranged from 3.187 billion to 3.379 billion bushels for production and 41.6 to 44.1 bushels an acre for yields.

 

In October, USDA projected a crop size of 3.250 billion bushels using a yield of 42.4 bushels an acre. The USDA is scheduled to release its November crop report Tuesday at 8:30 a.m. EST (1330 GMT).

 

"Excellent harvest results across the heart of the corn-belt would appear to indicate that USDA has underestimated US soybean production," Newedge USA analyst Dan Cekander said in a research note.

 

However, a common belief among analysts of lost acres and yields in the US Delta is seen limiting increases in overall US yield and output forecasts. The lost acres in the region range from 100,000 to 300,000 among analysts surveyed.

 

Historic rainfall levels have significantly reduced soybean-yield potential in parts of the Delta, Cekander said.

 

The weather in October did enough damage to Delta crops that the USDA will have to re-evaluate production potential in the Delta amid reports of losses ranging from 20 percent to 80 percent in some fields, said Mike Zuzolo, president Global Commodity Analytics.

 

Meanwhile, strong yield reports from Indiana is promoting a sense that will lead to higher yields in the eastern Midwest, said Bill Nelson, analyst with Doane Advisory Service in St. Louis.

 

Historically, when USDA has a pattern of yield increases from August to October, there is a positive bias of a 0.3 to 0.4 bushel an acre increase in the November soy estimate, Nelson said.

 

Nevertheless, traders are taking into account that only half the crop was harvested at the time of the USDA's survey and with a late planted crop, a cool growing season and delayed harvest, analysts do not have anything to compare this crop year to.

 

Some analysts said they wouldn't be surprised to see some adjustments in the domestic balance sheet, particularly in light of strong sales to China.

 

Nine weeks into the soy marketing year, US exporters had already met 66.1 percent of the USDA's total estimated soybean commitments for 2009-2010.

 

A larger US soy production estimate could largely flow through the balance sheet, increasing 2009-10 US soy carryout, said Cekander. USDA could show a US soy carryout estimate at 260-320 million bushels, he added.

 

Analysts, on average, project 2009-10 ending stocks at 235 million bushels, 5 million bushels above the USDA's current estimated of 230 million. The averages ranged from 180 million to 300 million bushels.

 

Several analysts said they expect the USDA to make upward adjustments to their export figures.

 

"The problem here is that if Argentina and Brazil have big productions of soy, China who has been overbooking US soy as insurance against crop problems in South America may cancel many of these purchased for March thru May shipment," said Tim Hannagan, analyst with P.F.G Best in Chicago.

 

"China could turn around and buy South American soy late January thru February when their yields are made, as South America will offer soy at a price lower than any US posted price to insure it moves as they don't store grain like we do here in the US," Hannagan said.

 

Most analysts do not anticipate any adjustment in the world balance sheet aside from adjustments in US output.

 

Prudential Bache analyst Anne Frick said, "if there's any change, Brazil soy production could go to 63 million tonnes from 62 million, but Argentina probably won't be changed."