The U.S. corn and soybean crops will continue to shrink. That's what two grain analysts and a meteorologist said in the wake of USDA's August 10 crop report.

The agency did lower its expectations of corn and soybean yield and production from July, as expected. But the analysts say USDA will be making further adjustments this month as the August report was based on crop conditions as of Aug. 1. That was before a yield-robbing spell of excessive heat set in over the Midwest.

“In the first 10 days of August, we saw temperatures in the Midwest averaging 6-12 degrees above normal,” said meteorologist Dave Streit. “We have also seen below-normal precipitation. As a result of that, there have been declines in crop yield potential of about a half a bushel for soybeans and corn.”

In the August report, USDA projected a 2.867-billion-bushel soybean crop, down from last month, but still a record, and a 9.266-billion-bushel corn crop, down from July and last year.

“This report is friendly,” grain analyst Rich Feltes said.

Not over yet

And if history is any clue, it's not over yet. “Last year, from this point on, corn yields came down five bushels and bean yields came down 2.7 bushels,” he said. “The major risk as we move forward is whether the weather of the past two weeks continues,” he said at the time the report was issued.

Feltes says a five-bushel reduction would push corn stocks to 1.1 billion bushels, “which suggests that $2.30 corn is under-priced. End users are at risk and there is no reason for them to be holding back and sustaining this hand-to-mouth buying pattern.”

In addition global grain stocks are 99 million tons below what they were two years ago. “So world stocks are declining. We still have a lot of old crop corn to move, but there is a lot of uncertainty about the new crop.”

“Longer term issues in corn are starting to become more constructive,” said analyst Greg Grow. “Export demand has picked up over the last few weeks. Lower prices certainly had something to do with that.”