By Kirk Maltais
The effect of scorching heat on maturing U.S. crops is driving the price debate in grain markets, with trading volume of grain futures muted as observers are split over the extent of crop damage.
Some clarity is expected next week from the U.S. Department of Agriculture's world supply and demand report, due on Tuesday. The monthly report will update the agency's projections on the expected output for crops being harvested this fall.
Traders are hesitant to take bold bets ahead of the report's release, as volumes for grain futures traded on the Chicago Board of Trade are light, with 99,273 continuous corn contracts and 90,566 soybean contracts traded on Thursday, according to data from FactSet, which for both is the lowest volume in a month.
Grain prices have been choppy, with futures catching support in late August on indications that corn and soybean crops will likely be hurt by unseasonably hot and dry conditions. Most-active corn futures were down 0.1%, to $4.86 a bushel, on Friday, while soybeans were up 0.3%, to $13.63 a bushel, and wheat down 0.1%, to $5.99 a bushel.
Analysts across the board agree that the tough weather seen in the latter half of August, as well as other bursts of hot and dry conditions seen this summer, will decrease the USDA's outlook this month. Where they differ is by how much.
In August, the USDA forecast that U.S. corn production would total a near-record of 15.11 billion bushels, with an estimated yield of 175.1 bushels an acre. Soybean production was pegged at 4.21 billion bushels, with a yield of 50.9 bushels an acre.
Agricultural brokerage firm Allendale forecasts that corn production will drop from the USDA's August predictions by over 300,000 bushels, to 14.81 billion bushels, with a yield of 171.5 bushels an acre, nearly 4 bushels an acre lower than the USDA's previous forecast. Soybeans are seen at 4.1 billion bushels, with yield at 49.6 bushels an acre.
However, other groups are forecasting that the changes made by the USDA will be slim for corn, if they happen at all. In its latest outlook, StoneX Group forecasts that national corn yields will drop only a tenth of an acre, to 175 bushels an acre, to make production 15.1 billion bushels.
In surveys released Thursday, analysts asked by The Wall Street Journal put expected corn production at 14.99 million bushels, with a yield of 173.3 bushels an acre, and soybeans at 4.14 billion bushels, with a yield of 50 bushels an acre.
Weather impact on corn and soybean crops are tied to the timing of when these crops are typically planted. Corn is often planted in April through May, with soybean planting extending from May until late June. As a result, the younger soybean crops is more susceptible to late summer weather volatility, while the more-mature corn crop is mostly grown and ready to be harvested.
A cold front is forecast by DTN to move through crop-growing areas this weekend to early next week, with temperatures then growing hotter after the front moves out.
"Harvest will ramp up in a lot of areas with relatively cooperative weather to allow it to progress rapidly," said Doug Bergman of RCM Alternatives in a note.
The U.S. Drought Monitor's latest update on Thursday showed a spread of drought conditions in portions of the Midwest, including Iowa, Minnesota, and Wisconsin.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
09-08-23 1226ET
