Good says the August corn and soybean production forecasts will be based on the combined yield and harvested acreage forecasts from the two surveys. For a more complete description of the data collection and yield forecasting methodology used by the USDA, download our report (pdf).

"The reliability of the USDA production forecasts increases during the forecast cycle from August through November," he says.

The USDA's August 2010 Crop Production report indicated that the chances were two out of three that the August corn production forecast would not be above or below the final estimate by more than 6% and a 90% chance that the difference would not exceed 10.3%, he says.

According to Good, the 2010 August forecast was 7.4% larger than the final estimate. For soybeans, the USDA indicated a two out of three chance that the August forecast would not be above or below the final estimate by more than 6.6% and a 90% chance that the difference would not exceed 11.5%. The August 2010 forecast was 3.1% larger than the final estimate.

"In early August last year, the market was generally expecting record or near record U.S. average corn and soybean yields. The 2010 U.S. average corn yield was 11.9 bu. (7.2%) below the record yield of 2009," he says.

The 2010 U.S. average soybean yield was only 0.5 bu. (1.1%) below the record yield of 2009. This year, analysts are generally anticipating a U.S. average corn yield below trend value due to adverse planting and growing conditions in many parts of the country and extremely high temperatures in July, Good adds.

Expectations for the final yield forecast are generally in the low 150-bu. range. Yield expectations are more bunched for soybeans, recognizing the importance of August weather. Expectations for the final estimate tend to be in the 41-44-bu. range, he says.

"Our examination of other years since 1975 with July weather conditions similar to 2011 results in a corn yield expectation in the 150-154-bu. range and a soybean yield expectation in the 41-43-bu. range," he says.

"Assuming (1) that Sept. 1, 2011, stocks of corn are about 50 million bushels larger than the current projection of 880 million bushels, (2) that demand weakness results in 2011-2012 marketing year consumption about 150 million bushels less than the current USDA projection of 13.5 billion bushels, and (3) that minimum marketing-year ending stocks are 5% of consumption, the 2011 crop would need to be 13.085 billion bushels or larger to avoid the need for higher prices to curtail consumption," he says.

Based on the current forecast of 84.9 million acres harvested for grain, these assumptions imply a need for the average yield to be above 154 bu., Good says.

"For soybeans, Sept. 1 stocks that are 40 million bushels above the current forecast of 200 million bushels and consumption that is 100 million bushels less than the current forecast of 3.264 billion bushels implies the need for a 2011 crop of at least 3.08 billion bushels," he says.

Based on the current forecast of harvested acreage near 74.3 million, a crop of that size implies a need for the average yield to be above 41.5 bushels, says Good.