Ron SterkSurprisingly high U.S. Department of Agriculture 2019 corn production and yield forecasts sent corn futures tumbling the 25c-a-bu daily limit on Aug. 12, while soybean futures declined but less steeply amid a 19% forecast drop in production from 2018.

In its first survey-based Crop Production report of the season (for U.S. row crops), the U.S.D.A. forecast 2019 production of corn at 13,901 million bus, down 3.6% from 2018, and soybeans at 3,680 million bus, down 19% from record-high outturn in 2018. Average corn yield in 2019 was forecast at 169.5 bus an acre, down 6.9 bus, or 3.9%, from 2018. Corn harvested area was forecast at 82 million acres, down 1.6 million acres from the U.S.D.A.’s June Acreage report but up 300,000 acres from 2018. The average soybean yield was forecast at 48.5 bus an acre, down 3.1 bus, or 6%, from last year. Harvested area was forecast at 75.9 million acres, down 3.4 million acres from the June projection and down 12.2 million acres, or 14%, from 2018, perhaps reflecting farmers’ doubts about a substantive resumption of soybean sales to China any time soon.

While larger than expected, corn production still would be the smallest since 13,602 million bus in 2015 and would be down 8% from record-high production of 15,148 million bus in 2016. Soybean production would be the smallest since 3,357 million bus in 2013.

The corn yield estimate was possibly the greatest surprise to the trade, which had expected lower, not higher, yields from the U.S.D.A.’s non-survey-based projection of 166 bus per acre in the July WASDE.

The U.S.D.A. corn production and yield forecasts were above the full range of trade expectations, that averaged 13,164 million bus and 165.3 bus per acre. The U.S.D.A. soybean production and yield forecasts were within the range of trade expectations, with production below the trade average of 3,783 million bus but yield above the trade average of 47.5 bus per acre.

Chicago corn futures were down the 25c-a-bu daily limit nearby through May 2020, posting the sharpest decline in six years, with prices continuing to drop on Aug. 13, but less severely. Soybean futures were down about 11c a bu shortly after the release of the U.S.D.A. data with prices regaining most of those losses on Aug. 13.

The market reaction was in sharp contrast to the June WASDE report, after which corn futures soared to five-year highs after the U.S.D.A. sharply reduced its corn yield and production forecasts, based on adverse weather and non-survey yield trends. The market again was whipsawed by the June 28 Acreage report, which showed corn area much higher than expected, with corn futures tumbling but soybean futures briefly rising.

The U.S.D.A. resurveyed corn, soybean, sorghum and cotton growers in 14 states in July who had indicated acreage not yet planted when surveyed earlier for the June Acreage report due to this year’s adverse weather. The trade, which had widely doubted the U.S.D.A. corn and soybean planted and harvested area projections in the Acreage report, had expected “corrections” based on the resurveying of growers in July, especially for corn.

More in line with trade expectations were U.S.D.A. “prevent plant” data, also released Aug. 12. The U.S.D.A. said farmers were unable to plant a record 19 million acres this year because of floods and heavy rainfall, compared with 2 million prevent plant acres in 2018. There were 11.2 million acres of corn not planted, 4.35 million acres of soybeans and 2.2 million acres of wheat.

The seeming disconnect between 11.2 million acres of prevent plant corn versus a 900,000-acre increase from 2018 in corn planted area suggests a total corn base of more than 101 million acres, said Todd Hubbs, University of Illinois agricultural economist. Some suggest those increased corn acres were planted after insurance deadlines in an effort to get larger payments under the governments’ Market Facilitation Program (payments to farmers to offset losses from retaliatory tariffs).

There also are doubts about the soybean yield forecast, which was down from a year ago but unchanged from the U.S.D.A.’s July WASDE projection of 48.5 bus per acre.

Traders in part have been watching weekly U.S.D.A. Crop Progress reports in which aggregate (18-state) good-to-excellent crop condition ratings have been well below year-ago levels for both corn and soybeans. But as Mr. Hubbs noted, there is a wide range of crop conditions, with dismal ratings for both corn and soybeans in the key eastern Corn Belt states of Illinois, Indiana and Ohio, but much better (and offsetting) ratings west of the Mississippi river, including such key states as Iowa, Nebraska and the Dakotas as well as some mid-south states for soybeans.

“Uncertainty remains for U.S. corn and soybean supply this year,” Mr. Hubbs said. “Prices will reflect crop production potential with a strong emphasis on yield as we move into the harvest period.”