Bullish reaction on corn and soybeans

USDA put the corn yield at 171.8 bushels per acre, up from last month’s 169.9. Yet, corn is not falling apart. It is 2 cents higher shortly after the report. Before the report corn was down 3 cents. USDA lowered the soybean yield to 49.5, last month it was 49.9. The corn and wheat ending stocks were higher than expected. Soybean ending stocks were lowered to 430 million bushels, last month it was 475 million bushels. Soybean ending stocks less than expected looks to be the driving force for higher soybean and corn prices shortly after the report.

It is also most surprising to see corn rally with the 171.8 bushel yield. We could see the funds short position in jeopardy with the price action in the first 15 minutes.

Headed into this report this is much fear of seeing a bearish yield report with yields climbing even more than what USDA has estimated for corn and soybeans. At the same time there is much hope that USDA finally realizes they have yields too high. October is typically the month when actual harvested yields begin to flow into USDA calculations. That could be somewhat difficult as harvest for both corn and soybean is behind normal. Earlier this week USDA put the US corn harvest at 22% while the 5-year average is 37%. The trade was looking for 25-30% completed. The US soybean harvest was at 36% while the 5-year average was 43%. The trade was looking for 35-40% completed.

Traders will be watching three numbers in the US corn and soybean supply and demand tables: yields, exports, and ending stocks. There continues to be much talk that the US corn exports will drop below those of last year. That is no surprise with all of the corn flowing out of Brazil and Argentina. Last year the US exported 2.295 billion bushels of corn. USDA currently has new crop 2018-2018 corn exports at 1.85 billion bushels. Some think they corn exports could eventually drop to just 1.65 billion bushels. US soybean exports are currently projected at 2.250 billion bushels. Last year the US exported 2.17 billion bushels of soybeans. Others look for harvested acres of soybeans to increase while seeing harvested acres of corn decline.

Last month USDA put the US corn yield at 169.9 bpa and the US soybean yield at 49.9 bpa. Trade estimates for this month’s report are a touch higher. The average trade estimate for the corn yield is 170.1 bushels per acres with the average estimate for soybeans at 50 bushels per acre.

Producers across Ohio and the Midwest are hoping this USDA monthly report will turn the tide of the past several months of seeing bearish reports for corn and soybeans. Many have been concentrating this harvest to date to get soybeans off. Corn moisture did decline earlier this month, helped significantly with those 3-5 days of 90 degree temperatures. It is no surprise that recent rains this week have pushed moisture levels higher. There has been much frustration in harvesting soybeans with moisture levels often between 9-12%. Yet, those same soybeans have often seen lots of green stems which means slow travel for harvesting, difficulty in seeing soybeans feed into the header, and in even some rare cases of having to cut soybeans in one direction. That combination makes for lots of frustration and angst.

Daily ranges for corn and soybeans have been extremely narrow this past week. We have seen several days for the corn daily range to be 3 cents or less. Soybeans even had one day where the daily range was a minuscule 4 cents. Ranges like this for soybeans are extremely rare. Others have commented that the range from for corn and soybeans so far the entire calendar year of 2017 are the narrowest of the past ten years. Many producers across Ohio have seen 3-4 inches of rain since last Friday. It has given them time to catch up on paperwork and do any maintenance needed on combines and grain trucks.

The weather break has been significant this past week. It has certainly slowed basis declines seen during harvest. The low point of corn and soybean basis levels should take place in the next ten days.The break also allows producers time to sock away bushels without the next grain truck to unload staring them in the face. This gives elevators fits as one day you think there is a huge amount of inbound bushels yet to arrive, but two days later the truck line is zero.

Bottom line, don’t be discouraged. Prices will indeed rally when all the news says the bottom has yet to fall out.

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