Whoops! USDA has to eat its optimistic projections from September 30 on corn crop and sets off commodity surge

10/12/2010 1:17 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

It looks like the U.S. Department of Agriculture has been completely wrong-footed by the U.S. corn crop. And that has sent agriculture stocks soaring today, October 8.

Just a few months ago the USDA was projecting a record crop. Just a couple of weeks ago on September 30, the agency projected corn production of 13.16 billion bushels on a near record yield of 162.5 bushels an acre.

On October 8 shockingly lower projections completely reversed the shocking higher estimates issued by the USDA on September 30.

The USDA is now projecting final corn production of 12.664 billion bushels and a yield of 155.8 bushels per acre. Analysts have been arguing that September’s USDA projections were too high given conditions in the field, but even those analysts were projecting a yield of 159.9 bushels per acre. Last year set a record yield at 164.7 bushels an acre.

The revisions to the supply/demand picture were big enough to move the commodity and stock markets. The USDA is now calling for an end of the year corn inventory of just 902 million bushels. That more than 19% below the September estimate of 1.116 billion bushels for year-end inventory. Ending corn inventory for 2009-2010 stood at 1.6708 billion bushels.

Stocks moving up on the news include Mosaic (MOS) and Agrium (AGU) in the fertilizer group, seed companies Monsanto (MON) and Syngenta (SYT) and farm equipment makers Deere (DE) and AGCO (AGCO).
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