Grains –
The WASDE report is due tomorrow afternoon and we’ll cover expectations for that here tomorrow. Today, however, I want to briefly cover tomorrow’s other important release which will be Conab’s update on production estimates. For your review I’ve posted last month’s recaps here.
By now you’ve likely seen several newswire reports continue to push Brazilian soy production estimates higher. Estimates I’ve seen so far this week range from roughly 107-109 mmt, compared to last month’s Conab estimate of 105.6 and WASDE’s last estimate of 104.0 mmt. Also note the average guess for WASDE’s revision tomorrow is “only” 106 mmt.
Below I’ve plotted a history of Brazilian soybean yields as reported by Conab. For 16/17, I’ve plotted the yield that would be necessary to achieve a 107 mmt crop using Conab’s last area projection. As you can see, this would be a new record yield, which might lead some to think the high end of these recent projections is overly-optimistic. However, note that it is just barely a new record and also note it really isn’t that much above the trendline plotted on the chart.
It seems we’ve heard a lot of talk in US circles about a “new paradigm” on soybean yields lately, but for some reason we’re not yet translating that into our yield projections in South America. This past year’s US soybean yield was roughly 11% above the linear trendline…what would a Brazilian yield of 11% above trend equal? Based on my rough math that would come in roughly 115-116 mmt. Please keep in mind I’m not sitting here trying to forecast such a crop, but I’m merely pointing out that based on our recent US experience, we might not have learned our lesson in projecting South American yields. I think an expectation +/-107 mmt from Conab tomorrow is a pretty good bet, but I honestly wouldn’t be too surprised with something higher.
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