Corn



USDA's first survey based crop production estimate came in 10.976 billion bushels, down 136 million bushels from a year ago. The August estimate is above the average trade forecast by about 180 million bushels. The national average yield is 152.2 bushels per acre, up from 2005's yield of 147.9 bushels and USDA's July adjusted trend yield of 149.0 bushels. The projected U.S. yield would be the second highest on record, trailing only 2004's 160.4 bushel yield.



Projected yields across the Corn Belt were good, but not exceptional. USDA indicated ear counts in 2006 will be the second highest on record behind 2004 for the objective yield states overall. As we found on our recent crop tour, increasing plant populations and ear counts are factors that are driving yields higher.



No changes were made to the 2005-06 supply and demand estimates. Ending stocks remain at 2.062 billion bushels. With the higher 2006 corn production estimate compared to last month and tightening stocks for other feed grains and wheat, USDA increased corn feed and residual use by 75 million from last month, to 25 million above 2005-06. Corn for ethanol was unchanged at 2.15 billion bushels, but other food and industrial use was lowered 5 million bushels. Total use in now forecast at 11.815 billion bushels, up 80 million from last month and up 640 million from the 2005/06 season. Rising consumption will pull ending stocks down 830 million bushels from this year to 1.232 billion.



Soybeans



The first USDA estimate of the size of the 2006 soybean crop was surprisingly small. USDA put this year's soybean yield at 39.6 bushels per acre, producing a crop of 2.93 billion bushels. This year's yield would be well below the trend yield of 40.7 bushels per acre used in previous USDA's forecasts and down 8.5% from the 2005 level. During the first couple of weeks in August weather conditions have been favorable for the soybean crop across the major growing areas. Moisture levels have improved from Nebraska east, at a critical time in the soybean reproductive cycle. Last year the soybean crop had poor condition ratings at the beginning of August, but with good weather in August the yield was record high. Recent improvements in weather conditions suggest that the U.S. soybean yield and production estimates will be raised in future reports.



With the smaller crop estimated by USDA, soybean supplies are tighter in 2006/07 than projected in the July report. USDA boosted exports in the 2005/06 season by 25 million bushels from July to August, to 930 million bushels. Crush was also given a slight boost, and ending stocks for the 2005/06 crop year are now projected at 515 million bushels, down from 545 million in the July report. The combination of lower beginning stocks and a smaller crop caused the estimate of total supply for 2006/07 to fall by more than 100 million bushels compared to last month. Under the August USDA scenario, total disappearance exceeds use in 2006/07 and soybean stocks decline to 450 million bushels by next year. Just last month the forecast called for an increase in stocks to a record 560 million bushels.



Wheat



USDA trimmed the total wheat production forecast to 1.801 billion bushels, down 5 million bushels from the July forecast and down 304 million bushels from last year. The revised production forecast is about 35 million bushels above market expectations. A 7.2 million metric ton decline in world production reinforces the positive global supply/demand situation and is likely to limit the negative market reaction to the U.S. data.



The small decline in projected wheat production flowed through the U.S. balance sheet, dropping projected ending stocks to 434 million bushels, down 4 million bushels from the July forecast. USDA raised the season average price forecast to the $3.90 to $4.50 range, up 20 cents from the July projection and up sharply from last season's $3.42.



Lower world wheat production was a major feature in the August report. USDA cut the EU wheat crop estimate to 119.35 million metric tons, down from the 126.1 million ton July forecast and down from 122.73 million last year. In addition, the Canadian crop estimate was shaved 1 million tons to 25.5 million tons. Those declines were partially offset by an upward revision in the FSU crop estimate to 80.5 million tons, up 1.8 mmt from last month. Despite that small upward revision, the FSU crop is down sharply from last year's 92.2 million tons. World wheat stocks are forecast to fall to 128.4 million metric tons, down 4.8 million tons from the July forecast and down 17.3 million tons from last season. The steep decline will drop world wheat stocks to the lowest level since 1981/82.