Ron SterkWASHINGTON — U.S. Department of Agriculture forecasts on Aug. 10 for both record high U.S. soybean production this year and soybean carryover next year came at an extremely inopportune time as trade issues escalate with China, the largest buyer of U.S. and world soybeans.

In its Aug. 10 Crop Production report, the U.S.D.A. forecast 2018 U.S. soybean production at 4,586 million bus, up 4.4% from the prior record in 2017 and the third consecutive year of record outturn, if realized. In fact, U.S. soybean production has set records in four out of five years (including 2018), dipping only slightly in 2015, largely on soaring demand from China, at the same time as soybean production in Brazil has steadily increased to record levels, also feeding China’s voracious demand for protein to feed hogs and poultry.

The average soybean yield was forecast at 51.6 bus per acre, up 5% from last year and the second highest on record, and more than offsetting a 1% decline from 2017 in forecast harvested area at 88.9 million acres.

The 2018 U.S.D.A. production forecast was above pre-report trade expectations from Dow Jones Newswires that averaged 4,428 million bus and ranged from 4,354 million to 4,576 million bus. The U.S.D.A. yield forecast also was above trade expectations that averaged 49.8 bus per acre in a range of 49 to 51.5 bus per acre.

The soaring production forecast more than offset projections for record high domestic soybean crush and even a boost in exports (from the July forecast) to result in a projected record high carryover of 785 million bus on Sept. 1, 2019, up 35% from the July projection and up 83% from 430 million bus forecast as the 2018 carryover in the U.S.D.A.’s Aug. 10 Agricultural Supply and Demand Estimates report. The U.S.D.A. projected 2018-19 soybean exports at 2,060 million bus, up 1% from 2,040 million bus as the July projection but down 2.4% from 2,110 million bus forecast for the current year and down 5% from a record 2,166 million bus in 2016-17.

Soybean futures chartAlthough the 2018 carryover forecast was below trade expectations, the 2019 forecast exceeded both the trade average and the full range of expectations.

As a result, Chicago soybean futures plunged more than 40c a bu, or about 5%, on Aug. 10 and for the week, although prices recovered some last week. New-crop November soybeans fell to a three-week low of $8.51¼ a bu on Aug. 13, holding above the July 16 low of $8.26¼ a bu but trading well below the May 29 high of $10.60½ a bu.

The U.S.D.A. forecast the average price of soybeans to range between $7.65 and $10.15 a bu in 2018-19, with the midpoint of $8.90 a bu down 35c from $9.35 a bu estimated for the current year and the lowest since $6.43 a bu in 2005-06.

Meanwhile, corn supplies also are plentiful. The U.S.D.A. on Aug. 10 forecast 2018 U.S. corn production at 14,586 million bus, down slightly (0.1%) from 2017 and the third highest on record after 14,604 million bus last year and 15,148 million bus in 2016. Average yield was forecast at a record 178.4 bus per acre, up 1.8 bus from 2017. Both U.S.D.A. corn production and average yield forecasts were above the average of trade expectations of 14,417 million bus and 176.3 bus per acre, but both fell within the full range of trade expectations.

In its WASDE report, the U.S.D.A. projected the carryover of corn on Sept. 1, 2019, at 1,684 million bus, up 8.5% from the July projection but down 17% from 2,027 million bus as the 2018 forecast. The higher production projection more than offset expected higher use of corn for feed and higher exports in 2018-19. The average price of corn paid to farmers next year was forecast to range between $3.10 and $4.10 per bu, with the midpoint of $3.60 per bu down 20c from the July forecast but up 20c from $3.40 per bu as the 2017-18 forecast.

Corn futures also dropped after the reports, ending the day down about 11c a bu and the week (ended Aug. 10) down about 12c, or 3%, although prices also recovered some last week. The new-crop December corn future followed the same pattern as soybeans, holding above July lows while trading well below May highs.

It was the first survey-based corn and soybean production and yield estimates for the season, based on conditions as of Aug. 1.

While weather obviously will continue to play a role in final crop production and yield, U.S. corn is past its key pollination phase while soybeans still are in their key pod filling stages in the 18 major states.