Fundamentally Speaking

For the second month in a row the USDA surprised the trade by issuing a 2018 U.S. soybean yield forecast well above expectations as they hiked the national yield by 1.2 bushels per acre (bpa) to 52.8 bpa vs. the average trade guess of 52.2 bpa. This is above the year ago 49.1 bpa figure and tops the prior record of 52.0 bpa set in 2016.

Weather in the key soybean growing regions over the past few months has generally been quite good with ample rains in the last half of August of particular benefit.

As part of its crop production briefing the USDA did release a graphic showing the soybean objective yield region, which indicates the number of pods per an 18 square foot area vs. the implied soybean pod weight. From the graphic, it appears that the implied pod weight for the 11 objective states which include AR, IL, IN, IA, KS, MN, MO, NE, ND, OH, and SD is 0.34 grams per pod. The implied pod weight is is the highest ever, yet the number of pods within this 18 square foot area looks to be around 1,786, which would be only the fourth highest figure ever trailing 2005, 2010 and 2016.

Given the USDA projection, it may be that the soybean plant is compensating for fewer pods per plant by having the individual beans heavier. The accompanying graphic shows the weighted number of soybean pods per 18 square foot area, the implied pod weight (grams/pod) and the weighted soybean yield for 11 objective soybean states.

The USDA does list a formula for deriving the implied pod weight, which is the published yield/pods/0.0889. The USDA in its crop production report indicated the 11 state number of pods within the 18 square foot area was 1,786. The 11 state weighted yield based on harvested acreage is calculated to be 53.9 bushels per acre. Using the formula 53.9/1786/0.0889 = 0.3395 or about 0.34 grains per pod. This is far above the year ago 0.3181 weight and makes sense given the percent of the crop rated good to excellent is 67% this year vs. 59% a year. We should note that early harvest reports and history suggest that the final 2018 U.S. soybean yield to be reported in January will be higher than what the USDA indicated on the 12th, perhaps markedly so.

Joel Karlin, Western Milling

(KA)