The report today was bearish for soybeans with ending stocks increasing from 330 million bushels to 365 million bushels. The U.S. soybean yield was estimated at 50.6, compared to last month at 48.9, while trade estimates were 49.2 Old crop soybean exports did increase by 60 million bushels which was at the top end of estimates. New crop soybean demand increased by 45 million bushels as exports were up 35 million bushels and crush was increased by 10 million bushels. With ending stocks up so much due to the increased production it was unable to hold the gains seen earlier in the day.
U.S. soybean production was estimated at 4.201 billion bushels, up 141 million bushels from last month. The last two weeks soybean prices have moved some days on the bigger supply while other days it was increased demand. In the end today, the higher production is now apparent.
U.S. soybean production is a new record. It is just a matter of how high it goes. The higher production will keep soybean prices under pressure with November CBOT soybeans having great difficulty in trading above the $10 mark in these current conditions. Earlier today it had reached $9.90. At 12:30 p.m. they were $9.62.
Corn production was lowered as expected. The U.S. corn yield was 174.4 bushels per acre while production was 15.093 billion bushels. Production was lowered 60 million bushels. Both yield and production were above trade expectations.
Prior to the report corn was down 1 cent, soybeans were up 7 cents, and wheat at up 2 cents. At 12:30 pm corn was down 3 cents, soybeans down 18 cents, and wheat was up 3 cents.
Today’s USDA monthly supply and demand report will be closely watched to see two important numbers in the tables for corn and soybeans. First, will be the corn yield. Traders are expecting a slight decline from last month’s U.S. yield at 175.1 bushels per acres. The average trade estimate put the corn yield at 173.4. Second, will be how much USDA increases soybean demand. In addition, the soybean yield is expected to increase. While many are suggesting the U.S. soybean yield to eventually be above 50 bushels per acre, the trade expects that number to be a stair step process, taking several months to reach that level.
The biggest number traders will be watching should be in soybeans and the export demand. Old crop exports are expected to increase 40 to 60 million bushels. If USDA increases the yield from last month’s 48.9 bushels to the trade estimates of 49.2 bushels and exports grow 40-60 million bushels, then ending stocks do not increase. Last month USDA put the new crop soybean ending stocks at 330 million bushels.
The general trend of thought the past month has been for the corn yield to come down while the soybean yield will go up. Early corn harvest reports across Ohio and the Midwest indicates corn yields are disappointing and below previous expectations. Many in Ohio will have above average corn yields but not record breaking.
The U.S. Gulf soybean basis for soybeans is at a big inverse for nearby barges due in part to tight U.S. stocks, record September export demand, as well as soybean harvest starting later than expected. The vessel lineup at the Gulf for September is largely for soybean boats. With the heavy rains last month in Louisiana, harvest has been delayed across much of the southeast region of the U.S.
Keep in mind that grain prices are constantly looking at fundamentals. Things like crop size, yields, and exports go a long way to determine prices. But other outside factors also come into the equation. The U.S. dollar, crude oil, and interest rates are some of those factors. Permeating throughout the financial markets almost constantly are interest rates. Last week on Friday U.S. stocks took a big hit, closing down 394 points. A big factor for the decline suggested U.S. interest rates could be increasing during this months Fed meeting on September 20 and 21. As of today the likelihood of seeing an interest rate increase is at 21%.
Don’t be surprised to see a wide price range for soybeans after the report is released. It could easily be 15-25 cents within the first 10 minutes of the report. The computers often are programmed to make buys or sells based upon the headlines. For example, one number in the soybean table could be negative or bearish while another number is positive or bullish. Those types of headlines could see the computers both buying and selling in a short period of time. The last thing producers want to see is a bullish report and then a lower close. That suggests the bullish news is no longer bullish.
Corn is still in a trading range. December corn is at $3.38, November soybeans at $9.62, and December wheat at $4.07. Soybeans appear to have the highs in near term unless weather problems delay harvest or export demand increases even more.