Bullish. That is it in a nutshell.
The numbers from today’s report are bullish. Traders were most surprised that USDA lowered, not raised the corn yield. That would be called the biggest surprise from today’s report.
Prior to today’s report at noon, traders were looking for a friendly soybean report while expecting bearish corn numbers.
Just before noon, corn was down 5-8 cents with soybeans up 21 cents. Minutes after the report, corn was up 10-12 cents. Soybeans were up 40 cents.
For at least two weeks we have seen isolated comments mentioning that the soybean and corn ratio was near historic highs. Friday night that spread was 2.61. A decline in the ratio near 2.5 suggests that at current prices for new crop corn of $4.52, new crop soybeans could be closer to $11.30. That price was 52 cents below Friday’s close.
USDA estimated U.S. corn production at 13.763 billion bushels with a nationwide yield of 154.4 bushels per acre. The yield drop is 2.1 bushels per acre. Last month corn production was 13.950 billion bushels and a nationwide yield of 156.5 bushels. With the cool and wet summer in most of the Midwest, it seemed a given that corn production would be at least 14 billion bushels. But just like basketball, that is why you play the game in spite of the oddmarkers. Weather reports suggest that areas in the Midwest under stress with deficient moisture levels continue to shrink. Forecasts earlier today had a dry week for much of the Midwest with little rainfall expected. Temperatures continue to be normal to below normal.
The U.S. soybean production was estimated at 3.255 billion bushels with a nationwide yield of 42.6 bushels per acre. These numbers compare with the July report when soybean production was estimated at 3.42 billion bushels and a nationwide yield of 44.5 bushels per acre. It could be a tie for the biggest surprise of today when you see the 2013-14 ending stocks for soybeans at just 220 million bushels. That number is below the low end of trade estimates. Just a reminder that today’s production estimates include the first actual field surveys in the U.S. for corn and soybeans.
This is a big day for USDA numbers. In addition to the monthly supply and demand report at noon, export loadings were out at 11 a.m. Later today at 4 p.m. USDA will be releasing their weekly crop ratings report. Most estimates are suggesting that both the corn and soybean ratings will decline 1-2% when totaling the good and excellent columns.
Earlier this morning, some had suggested that the weekly crop ratings report could be of equal or more importance than today’s supply and demand report. Some analysts had already suggested that sharply higher soybean prices could result should USDA release their ending stocks estimates below the low end of estimates.
The corn yield reduction will leave many scratching their heads. However, it could be USDA’s way to make up for the much higher than expected corn acres that came out late in June.
Stay tuned. It promises to be an exciting four to six weeks coming ahead as harvest gets underway later next month.