USDA Report - 10/12/17

11:01 AM

Market moving news: Surprise in national corn yield at 171.8 bu/ac, up from last month's 169.9. Despite that the reduced yield in soybeans is pushing the market higher after the USDA estimating a 45 mbu lower carryout, corn following.

 

With the weather really slowing harvest over the last week, this report was the first bit of news some people were looking for all week. Corn yield estimates from analysts were averaging 170.1 bushels/acre after last month's 169.9 yield estimate from the USDA and early harvest numbers being better than expected. The USDA released a 171.8 bpa number this morning much to everyone's surprise as the highest estimate from analysts was 171.5. If the 171.8 number holds, it would be the second largest yield behind only last year's 174.6, and would also result in the second-largest production of 14.28 billion bushels, slightly ahead of the 2014 crop. Soybeans are the story of the day, though; the yield reduction was met with an increase in acres harvested and netted out to no change, but last year's ending stocks were reduced 44 mbu with increases to usage (31 mbu) and decreases to production and imports (13 mbu).

 

Some changes were made to the old crop corn balance sheet, with ending stocks reduced 55 mbu through increased feed use and FSI (extra seed needed for re-plant perhaps?!?) - resulting carry-in to this year helped limit the increase in production to this year's expected ending stocks. The USDA also increased feed use for 2017/18 by 25 mbu and FSI by 10 mbu (more seed usage?) and coupled with the 55 million fewer bushels we thought we had, only saw 2017/18 carryout up 5 mbu net to 2.340 billion bushels.

Regardless of what anyone says about the USDA's methodology or how they think the numbers are either long or short, the end of the day still boils down to total expected supply of 16.625 billion bushels and only 14.285 billion bushels of demand -- we won't be seeing any significant run ups in the corn market until that supply number comes under threat. World coarse grain production was also up from last month, and global corn production was seen 6.2 MMT (244 mbu) higher than September's estimates. Despite that, global demand is expected to increase and world corn stocks are estimated to be down 1.5 MMT from last month, and 1.023 billion bushels from last year's estimates at this time.

The change in last year's demand to soybeans has followed a recent trend from the USDA of continually whittling away at soybean ending stocks throughout the year and could be where a lot of the bullish sentiment to today's report is coming from. The prospects of this year's ending stocks still remain large at 430 mbu, but looking at the possibility of increased demand in the coming months with our export markets and the insatiable demand of soybeans from the Chinese, it's easy to paint a scenario where we see the 2017/18 ending stocks number flirt with sub-400 mbu pretty easy and not too much of a stretch to see if back near the mid-300s. The one caveat to the lower ending stocks would be an adjustment back up to the yield number as we continue to hear record soybean yields. Now that could be attributed to the garden spot we're fortunate to have been in the last few years, but there are still better-than-expected and excellent yield numbers from a good swath of the harvest belt (case-in-point, the increase to soybean G/E numbers this week). World soybean production is seen down from last month but soybean stocks are expected to be larger year-over-year. Estimates of SAm production show Brazil down 6% from last year and Argentina unchanged. This year's soybean exports are running ahead of last year's pace which fits the narrative the USDA is painting right now with an increase of 75 mbu, question is, do we have room to work that higher?

 

AG

 

Disclaimer: This commentary does not represent the views of Tremont Cooperative Grain Company, but rather one author's opinions. Data used in this commentary is taken from sources believed to be accurate, and is intended for informational purposes only and should not be solely used to conduct any type of trading strategy. For more information, please contact Tremont Cooperative Grain Company at 309-925-4981, or email info@tremont.coop.