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This is a transcript of the podcast: Global Crop Prospects - August 2017

Following the recent publication of the IEG Vantage August World Crop Report , Roger Bernard spoke to IEG’s Bill McCary to recap the survey results of the IEG crop production figures for the month of August.

Roger Bernard

Hello, and welcome to the podcast. Today, we’ll take a look at the latest information coming out from IEG on the crop prospects for the 2017 growing season. I’m Roger Bernard with Agribusiness Intelligence. Joining me is Bill McCary from Informa Economics IEG in Memphis. Bill has primary responsibility for preparing the crop information published by IEG. Bill, as we look at this 2017 growing season, and we have at least the first survey based estimate coming from USDA shortly. Ahead of that though, your survey work has revealed what in terms of the 2017 corn crop?

Bill McCary
That’s right, Roger. Informa Economics has run a monthly survey. We’ve done this for a number of years. Actually, maybe a number of decades, and the August survey is the first one that’s in front of the USDA’s first yield survey that is for row crops, for corn, soybeans and cotton. It’ll be their second survey for spring wheat, winter wheat and the other small grains. The corn production we’re looking to be 13.85 billion bushels. We had been 13.9, so it’s just a slight reduction from where the Informa figure from mid-July was, which was kind of a special thing for us. That wasn’t based on a survey, but we adjusted spring wheat, durum and corn yields mid-July just based on the fact that the first half of July was quite unusual with a lack of rain in the Western Corn Belt and the Northern Plains.

Also, above normal temperatures that stressed the crops as they went into the silking phase for corn, and then, of course, stressed the spring wheat crops as they attempted to fill grain. Compared to our 1st July survey, we did survey corn yields. We do that every year on 1st July, just to, kind of, get an idea of what the crop potential would be early - and the respondents told is it would be about 170 bushels per acre, and that was in line with what USDA had said. The current figures compared to the 1st July survey have a big cut in South Dakota, almost 30 bushels an acre. We’ve reduced that crop since 1st July based on the bad weather.

The improvements, it’s kind of a short list. Minnesota has received good rains and also the state of Ohio, and I think there’s some kind of debate over whether Ohio is an improvement, but our survey, we had a lot of people that put in a lot of nice numbers for Ohio. I was there earlier this month and western Ohio looked awfully good to me. It was about to tassel, about to silk, and it had recently rained, and it was really looking good. Another area that is an improvement since 1st July through the month of July that’s probably not on anyone’s radar screen is the southern states, the Gulf Coast, the Carolinas, Georgia, Alabama, Tennessee, Arkansas, Mississippi and Louisiana. Not a lot of acres individually by state, but when you put it together, they make a nice-size of Corn Belt state. Then, if you add Texas in there as well, it’s had good weather, so we’ve had improvements in the southern crops where we’re going to have a good, early harvest. They’re already harvesting corn in Georgia, South Alabama, Louisiana and Texas, and yields are coming in quite good, so that’s what’s going on with corn.

Any adjustments relative to acreage? I know USDA is working off their June acreage report. What about your numbers, Bill, in terms of what is coming from IEG – did you adjust the acreage side?

We have not adjusted any planted acreage - that’s for any crop - but we did adjust, and this was just based on analysis, we didn’t survey for this, we don’t survey for harvested area in this report, but based on analysis of the situation, we did reduce harvested area for spring wheat and for durum in the Dakotas and Montana. You just have such a situation where you have a third of that crop, roughly, is rated poor to very poor. It’s been subjected to extreme heat, lack of rain. We had the hard red spring wheat tour earlier this month. People probably have heard that a lot of the comments about that report came out with a nice yield, but they didn’t know what to do with acreage. They did comment that there was a lot of hay-baling but it was the same thing as, like, well, is that hay spring wheat hay or was that hay, like, a pasture? You don’t know, but you just get the sense of when you have, like, really bad areas that, you know, just-, is it worth to take the grain or to take the forage. We opted to go ahead and do that. We think that better reflects the situation.

We really didn’t lower the yields so much again. We adopted the USDA July forecast for spring wheat and durum, and winter wheat as well, but then mid-July, along with the corn change that we talked about earlier, we adjusted the yields for spring wheat and durum. And then for this report, we re-surveyed, or we had our second yield survey, for spring wheat and durum, and it surprisingly came out, kind of, in line with where our mid-July numbers were. That wasn’t intentional, it just kind of happened that way. It also lined up with what the spring wheat tour found, which was really that the yield potential of probably what we think will be harvested isn’t very much different from USDA’s 1st July numbers. Maybe a bushel or two off, but it’s not a dramatic-, however, when you factor in the harvested area, that’s where, like, we’re down about 40 million bushels from our previous report, and it’s really just that the harvested area is the bulk of that change.

Now, USDA, if they follow past practices, they will not adjust harvested area in this, or we shouldn’t expect them to adjust harvested area, in this upcoming August report. They didn’t do in 2012, 1988 or 1983 - those are the three big drought years that I certainly have worked with. But there have been years when they did adjust acreage, and I don’t want people to confused with that in the August report. Those were the years that we had flooding like 2011, ‘93 and ‘95 in the June acreage report from USDA for the Northern Plains. That year was basically an intentions report, or still had that element in it, so USDA said, ‘You know, here’s the numbers but they’re not finished planting. We’re going to resurvey and we’ll let you know in August.’ Well, they let us know in August, they adjusted planted acreage and then when you look at the harvested acreage report, you think, ‘Aha, they will make changes in August.’ Well, that’s if they’re doing a larger survey to cover plantings. That’s not going to be the case this year. There wasn’t a question of how much acreage will be planted. Unless USDA breaks practice and does something like we did which is, sort of, go out on a limb and guess what harvest it will be, unlimited surveys, they will more likely wait until they have their big quarterly survey which is in September.

They put out their Small Grains annual summary on 30th September and that’s when we’ll find out what the harvested area will be. We’ve got, kind of, a little difference. Our guess for spring wheat is not what we expect USDA to do, or if you do it, you’d need to add, kind of, 40 million bushels to it.

Now, we’re in the month of August which is always viewed as the key month for determining the production potential in the US soybean crop. Given that caveat, and I know the USDA has been reluctant at times to really want to do an August production number for soybeans but, that being the case, we still have one coming. What did the IEG survey work reveal relative to this US soybean crop? Again, on the caveat we’ve still got a chunk of August weather left to go to determine crop potential.

Right, while we have taken, like, the corn yield down from, say, a 170 to maybe the mid-160s, some people in the industry are, like, 162, 163. Our number happens to be 166. The soybeans, we’re just under 48. We’re at 47.3 versus 48, and the big reduction is again, South Dakota, with what it’s been subjected to. We also tempered, lowered, Ohio and then Illinois. The western part of Illinois has also been subjected to some dry weather. The mid-South, Arkansas, you include Missouri, even though Illinois is-, and Iowa, but Missouri has gotten rains that those two states haven’t, and then you have Minnesota, Wisconsin, and then Ohio keeps thinking it’s got a big crop and I, kind of, want to believe it. I saw it a couple of weeks ago and it was beautiful. Yes, the soybean crop has yet to be made, so while we can, sort of, know that the silking for corn during July was-, the yield potential was reduced due to the weather, soybeans just kind of weathered through it and now we’re into the August period when it will set and fill pods.
Another thing about the soybean crop, whereas corn is, for most people, at least for crop observers, it’s a very easy crop, I think, relatively speaking, to forecast yield by looking at the field. You go out there, you count the stalks, you see the ear. You can look at the ear, you get a lot of information. How well did it pollinate? How well is it filling? You know, you just get a nice, general sense. Pod counts, on the other hand, are a little different. Each soybean plant can be a little different. Some can have fruiting branches, some can’t. You can have lots of nodes with lots of pods and vice versa, and it’s just their neighbours can overshadow each other. It’s just not quite as even. It’s a little more difficult to get a sense of what you have, so you could have, like, a beautiful field that is tall and green, and it may not have the pods or be putting on the pod weight. Or, you can have a short field that looks a little disappointing that could really surprise you when you put the combine in it, so visually, it’s a hard one to work on.

USDA relies on its objective yield survey in September, and one thing that will throw them off a lot is they’ll rely on high pod counts and they’ll say, ‘That’s a good yield potential,’ and low pod counts is a low yield potential. Well, that is true that you have to have the pods, but then it’s the pod weight. Is it one bean per pod or up to four beans per pod and then, in addition to that, it’s the seed size, so often USDA September forecasts are really-, maybe it’s a little bit better than the August, but not much, but when they start actually harvesting, that’s when we find out what the crop is, whereas when you look at, say, corn-, let’s just make up a number. Let’s say that the corn August yield has a 5% error, the September has maybe a 3, October has 2, November has 1, and then you get the final-, it just, kind of, as you move forward, you just know a little bit more about it each month. Soybeans are kind of like a guess, a guess, and the answer, and it’s just kind of a different animal.

Now, as far as our US cotton production potential, we do have, you know, more acres of cotton that went in the ground this year so that’s, you know, giving us an increase in the crop compared to a year ago, isn’t it?

That is absolutely true. We had, like, a 20% increase in cotton plantings this year, spurred on by better prices, and then in addition to that, from where we had put the crop a month ago, we added about 500,000 bales in this report. Again, it goes back to the Southern states. Texas is doing quite well weather-wise, and then when you get to the mid-South, Georgia’s now the number two, or has been for a while the number two, producing state. It has had quite good weather. The Carolinas all the way to west Texas is doing well, and then California, you know, we’ve all seen the drought has broken and there’s more irrigation water there, so they’re not complaining. Everybody is, kind of, participating. In addition to planting big, we’ve had a good start, but like the soybeans, where July weather really doesn’t matter, August does.

In the case of cotton, it’s August and September that both count in the case when you go to Texas, it’s September-October also count, and then you also want to really look at November. One thing that the crop could be, I think it’s only happened one time since I have been in the business, I’ve seen a freeze in west Texas but it is-, you just, kind of, have to watch it to see if you get that early frost out there. That can be a problem, but until then, you don’t know. And when you talk about cotton, the other thing that is just so important is the harvest weather, and a wet harvest is just detrimental to that crop whereas, take corn, it can stand up to a few rains. Cotton, it’s fluffy, so it’s soaking up the water, so it affects yield.

Real briefly then, to the global picture. What does IEG view as some of the keys for this August production potential around the globe for some key crops?

First off, let’s just go with the crop that is almost harvested that is getting bigger each time. We also run a survey in Brazil, and we added 2 million tonnes to Brazil’s corn crops, so it’s now 99 million tonnes. That’s a third larger than last season’s weather reduced crop, but when we shift over to the Northern Hemisphere corn production, of course, we’ve got a reduction from what we had been using in the US.

The Ukraine is having some problems. It’s been dry in the eastern part which is the main corn-producing part of the country during July, and it doesn’t look like August is going to be an improvement if the weather is right. The same thing in the EU - we’ve had dry weather in Romania, the Balkans, Italy, southern France – a key corn producing area. We’re using a 2-13 for China corn. That’s where we had been, but USDA is at 215 and the attaché earlier this month put it at 210. We are dry in north-east China. That’s a key producing region, so USDA may reduce its corn production for China, so we could have a potential decline in EU, FSU and China.

On the other hand, we’re dealing with a large crop out of both Argentina, from increased plantings, and then Brazil had, compared to last year’s weather problems, is producing 35 million tonnes more corn, which is the equivalent of finding another Argentina on the globe all of a sudden, just showing up for the four, you know, the current crop.

When we look at that situation with wheat, a lot of attention in now is on Europe, where there’s been some rather unfavourable conditions as well, right Bill?

Absolutely, I think the potential for European wheat was in about 150, we are now looking at a 147. Right now, we’re having dry weather in France, and now we’re looking at wet weather as we’re trying to harvest wheat in Poland and Germany, so it’s just if it’s not one thing, it’s another. It’s going to be also a lower quality out of that area.
Another area that is a question mark is Canada. We reduced that crop potential again – we’re looking at 25 million tonnes, compared to 32 million produced last year. We won’t get a Stat Canada forecast, it’s first one, whereas, you know, the USDA has already given us a spring wheat number and will give us another spring wheat number, Stat Canada’s first survey - and their first report will be August 31st, so we’re kind of in limbo on getting an official number from Canada.

Also, another area wheat-wise that’s not shaping too well is Argentina. The crop is about 90% planted but we’re having trouble with rain in La Pampa and Buenos Aires, getting that in the ground and we’ve reduced that crop from an 18 million tonne potential down to 16 and a half and we’ll see where we go from there. It’s not harvested until, like, December-January, so we’ve got time for that to work.

The other area is Australia. Now, Australia is starting to get rain. We’re moving into the area of when that crop will really be influenced by weather – Sept-November. It has just been a dry start for South Australia and their largest producing area, West Australia, so the establishment of that wheat has struggled so you wonder if they do-, they are getting rains and the rain has improved, but ‘what is there to absorb it?’ is just the question. Is it just looking like, you know, we just didn’t even come up? Australia right now, we’re 23 and a half million tonnes versus 35 last year, so over a 10 million tonne decline from last year in Australia. Ukraine, same thing. We are, you know, just like with the corn, well, the wheat had to endure the dry conditions as well so it’s slipped and we’re looking at a 23 and a half million tonne forecast for Ukraine that compares to a 27 and a half million tonne last year. Almost about a four million tonne reduction.

Russia is in a different situation. Their winter wheat is coming off really very good, and their spring wheat is being treated quite well. We increased production a little bit. We’re at 72 and a half. That’s equal to last year’s large crop for Russia, and some are now saying that that crop could now be 73, 74, even 75 million tonnes, so Russia could be the bright spot in all of this, but Canada, the US, at least with the spring wheat - Europe is a shaping up to not be so great, Ukraine, Australia, Argentina, a lot of numbers are not-, I mean, overall, we’re now looking at a maybe 20 million tonne reduction worldwide compared to last year’s wheat production.

Alright, well, thank you very much, Bill McCary with Informa Economics IEG in Memphis, recapping our survey results for firms’ crop production figures for this month of August. I’m Roger Bernard with Agribusiness Intelligence - thanks for joining us.

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