Mixed report, corn bearish, soybeans bullish

By Doug Tenney, Leist Mercantile

Major surprise for soybean ending stocks to be unchanged.

Following the noon report release, corn was down 9 cents, soybeans up 15 cents, and wheat  down 20 cents. Prior to the report, corn was down 2 cents, soybeans up 2 cents, and wheat down 12 cents.

Today, there are numerous moving parts, more than normal, to the monthly USDA WASDE (supply and demand) Report. Changes can include 2021 corn and soybean production, US grain exports, and 2022 corn and soybean production and yields. Brazil is expected to set another record for soybean production this growing season. Soybean imports into China will be closely watched to see if demand is slowing. 

Numbers highlights: US corn exports down 125 million bushels, US corn for ethanol down 50 million bushels, US 2022-23 corn ending stocks down 47 million bushels, and 2021 US corn production down 41 million bushels. US soybean exports down 40 million bushels, US soybean crush up 10 million bushels, US soybean 2022-23 ending stocks unchanged, US 2021 soybean production up 30 million bushels. Brazil soybean production is up 3 million tons to 152 million tons.

Expectations are for both US corn and soybean exports to be reduced. US exports face strong resistance on at least two fronts. First, the high US dollar which has made multiple new 20 year contracts highs the past two months. The higher US dollar adds additional expense for our goods purchased by foreign buyers.

Second, low water levels on the Mississippi River which has already caused barge freight costs to explode higher in the past three weeks. It also means grain facilities are loading barges with less bushels than normal. Higher barge freight directly affects Cincinnati basis levels, which are anywhere from 90 cents to $1.30 under December CBOT corn and November CBOT soybeans for fall delivery corn and soybeans. Cincinnati fall basis for corn and soybeans in the past have been 40 to 60 cents under during the fall harvest. We are hearing some producers in Illinois have been approached with monetary incentives to keep grain away from barge loading facilities this fall.    

US corn production was 13.895 billion bushels and a yield of 171.9 bushels per acres. Last month was 13.944 billion bushels for corn with a yield of 172.5. US soybean production was 4.313 billion bushels with a yield of 49.8 bushels per acre. Last month was 4.378 billion bushels with a yield of 50.5 bushels.

Trader estimates had US corn production at 13.885 billion bushels with a yield at 171.8 bushels. US soybean trader production estimate was 4.381 billion bushels with a yield at 50.6 bushels.

US 2022-2023 ending stocks: corn 1.172 billion bushels, last month 1.219 billion bushels; soybeans 200 million bushels, last month 200 million bushels; and wheat 576 million bushels, last month 610 million bushels.

Trader estimates for 2022-2023 US ending stocks: corn 1.124 billion bushels; soybeans 248 million bushels; and wheat 554 million bushels.

USDA today projected China would be importing 98 million tons of world soybeans, last month   was 97 million tons.

Twice in the past week changing perceptions concerning the extension of the Ukraine grain export corridor have produced dramatic and rapid double digit price changes for wheat. Last Thursday, the export corridor extension is thought to be on, wheat was down 23 cents. Monday the export corridor extension might be off, December 2022 CBOT wheat closed up 57 cents. Mid-morning Monday, it reached its high for the day at $9.49 ¾, as it came within ½ cent of touching the daily wheat limit of 70 cents. 

The rapid price changes for grains in recent months has shifted end user management of risk. Currently, it is all about end user margin risk management. Normally, it is about price risk management. Imagine being a wheat miller handling multiple millions of wheat bushels each year. Those millers are buying wheat from producers while selling flour to end users. Wheat prices from mid-February to mid-May increased $5 a bushel, only to fall $5 a bushel from mid-May to mid-August.

On Thursday the US Consumer Price Index (CPI) will be released. It is expected to be near the same 8% level seen for numerous months in 2022. Also, the US Fed will have another meeting on November 2, further interest rate hikes are expected. The last three interest rate hikes have each been ¾%.

Producers have enjoyed wide open weather the past three weeks with the US harvest progressing, soybeans 44% done, corn 31% completed. Rain will be most welcome Wednesday and Thursday as a break is needed with the frantic harvest pace. Those producers trying to get wheat in the ground will be welcoming the rains in huge proportions.

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