Higher rates of abandonment could lead to stronger cotton prices USDA’s August World Agricultural Supply and Demand Estimates (WASDE) Report is the first report of the year to incorporate survey-based yield estimates for summer crops based on the simultaneously published August Crop Production Report from the National Agricultural Statistics Service. Both reports are predominantly sourced from a telephone survey. Wheat yields were based on samples from field plot surveys. In this Market Intel, we will dive into a few major insights gleaned from the August WASDE Report.
Corn
The report is neutral for corn, falling in line with industry expectations. The new yield estimate for the 2023/24 marketing year is 175.1 bushels per acre, slightly below industry average expectations of 175.5 bushels per acre and a drop of 2.4 bushels from the July WASDE report. The newly projected yield would be 1% higher than the 2022/23 marketing year yield of 173.3 bushels per acre. While initially projected as a record-breaking corn crop, it is now projected to be the second-largest corn crop on record. Corn was off to a poor start early this season due to drought, but has rebounded with 57% being rated as good to excellent condition in the latest (August 7) Crop Progress report. This is in line with the 2019 and 2022 marketing years, but still well below the 2018, 2021 and 2020 marketing years.
At the state level, Indiana is projected to have a record-high yield of 195 bushels per acre, a 2.6% increase over 2022. Iowa is expected to have the highest yield in the country at 203 bushels per acre, and Texas is projected to have the largest year-over-year increase in yields, increasing 40% to 133 bushels per acre. Missouri has the largest projected reduction, falling 11.2% to bushels per acre.
While the 2023 crop is still expected to return to sub-$5 prices after two years of prices at or above $6 a bushel, the average farm price estimate was raised to $4.90 a bushel in the report, a 10 cent and 2.1% increase from the July WASDE projection. By close on August 11, December futures for corn had fallen to $4.74 a bushel.
Cotton
2023 cotton production projections dropped significantly from the July report, falling 15.2% to 13.99 million 480-pound bales. Year-over-year, this would indicate a reduction in production of 3.3% or 2.51 million bales. The 2023 production projection is far below industry expectations before the report release, which ranged from approximately 15.25 million to 16.25 million bales. The dramatic drop in production was caused by higher abandonment and lower yield estimates, with the national abandonment rate now projected at 22.2% and yields reduced to 779 pounds per acre. While still a high rate of abandonment, it is nowhere near the high rate of abandonment estimated in the 2022 crop, where 46.9% of planted cotton fields went unharvested.
Cotton abandonment rates have been rising, with a steady increasing trendline over the past 50 years and increasing year-on-year variability. The problem is particularly acute in Texas, the country’s largest cotton producer, which has had an average abandonment rate of 21% since 1980. An analysis from Texas Tech found that the biggest factor related to abandonment rates in Texas has been temperature, as measured by growing degree days, which have also been on an upward trend since 1980. As projected, 2023 will be the seventh straight year with national abandonment rates over 10%.
Revisions to other country’s cotton production did not make up for the drop in U.S. production, and total foreign ending stocks fell 2.22 million bales (2.4%) to 90.72 million bales.
Soybeans
Like corn, both soybean production and yields fell slightly below expectations and dipped from July’s report, falling 2% each to 4.205 billion bushels produced and yields of 50.9 bushels per acre. Despite an increase in projected beginning stocks (+2%, 260 million bushels) and imports (+50%, 30 million bushels), estimated supply is still expected to fall 2% to 4.496 billion bushels. While projected usage was also adjusted down, it fell only 1%, which led to projected ending stocks decreasing 18% to 245 million bushels.
Source: fb.org
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Categories: Indiana, Crops, Corn, Soybeans, Government & Policy