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Mixed reports churn markets

USDA slashes soybean stocks but gives corn bearish numbers

Grain futures are mixed this morning reflecting USDA reports that cut projected soybean carryout more than expected by made only modest reductions in corn. Corn and wheat prices tumbled lower immediately following today’s World Agricultural Supply and Demand Estimates (WASDE) report, while soybeans climbed around 0.75% higher in late morning trading.

The primary surprise was the agency’s soybean yield forecasts, according to Farm Futures senior grain market analyst Bryce Knorr.

“USDA cut a full bushel per acre off its soybean yield forecast, which was more than I expected given the slow pace of harvest, and more reductions could be coming in November after the impact of this week’s snow and freeze are calculated,” he says. “But the soybean market faces headline risk from the trade talks that started today in Washington if President Trump sticks to an all-or-nothing approach rather than take the incremental plan the Chinese want to do that would include buying a billion bushels or more U.S. soybeans. Look for the market to be very cautious because of that dynamic.”

As expected, USDA cut its projected harvested corn acres to 81.8 million acres but was less stingy than average trade estimates of 81.5 million acres. USDA also says yield potential is currently 168.4 bushels per acre, versus an average trade guess of 166.7 million bushels. Among those estimates, Farm Futures contributed a somewhat closer offering of 167.3 bpa. Those numbers leave current corn production estimates at 13.779 billion bushels – coming in moderately above average trade estimates of 13.588 billion bushels.

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USDA reduced its corn export forecast by 150 million bushels, citing smaller supplies and weakening U.S. competitiveness. Corn use for ethanol also dropped 50 million bushels based on September data from the Energy Information Administration. The agency also raised its season-average price received by producers by 20 cents to $3.80 per bushel.

“I warned about bullish expectations for corn going into the report, fears that were confirmed by USDA’s estimates,” Knorr says. “I expected only minor cuts to corn production and USDA didn’t even do that, leaving its outlook essentially unchanged. USDA’s corn carryout number was in line with my forecast, with the agency lowering its expectations for ethanol and export demand.”

Even so, the production cut seen by soybeans could ultimately be reflected in corn, Knorr adds – where harvest progress is even slower, and immature crops face more production risk.

“I’ve been saying for months that late planting means the size of the crop won’t be known until November or even January, when the full impact of this year’s weather will be known,” he says. “The key could be damage from this week’s storms, which may lower yields and harvested acreage as well if more fields get cut for sileage rather than harvested for grain.”

USDA was more bearish in its analysis of 2019 soybean production, moving estimated harvested acres down to 75.6 million harvested acres with per-acre yield estimates of 46.9 bpa. Both numbers were slightly below average trade estimates. Production estimates also fell to 3.550 billion bushels, versus the average trade guess of 3.562 billion bushels.

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After measuring lower production with a small increase in soybean crush, USDA projects ending stocks down another 180 million bushels this month. Smaller supplies have also raised prices in recent weeks, with USDA marking the season-average price for 2019/20 at $9.00 per bushel, a 50-cent increase.

USDA’s outlook for 2019/20 U.S. wheat included the trends of lower supplies, reduced total use and higher ending stocks. The agency lowered its season-average farm price by a dime to $4.70 per bushel.

“USDA as I expected raised its forecast for wheat ending stocks, cutting its projection for exports and incorporating the lower summer feed usage reported Sept. 30,” Knorr says. “Wheat will need help if it’s to rally further. The 10% of the North Dakota spring wheat crop still out in the field will be written off, which should help firm protein premiums. But winter wheat demand likely depends on poor seeding of the crop from France to the Black Sea, as well as problems in the southern hemisphere.”

Compared with analyst expectations, USDA’s total data on ending stocks were mixed. Domestic corn stocks for 2019/20 were higher than analyst estimates of 1.682 billion bushels, moving to 1.929 billion bushels. Soybean ending stocks were below analyst estimates of 496 million bushels, with USDA moving that number to 460 million bushels. Wheat stocks were also a bit higher than analyst estimates of 1.011 billion bushels, with USDA putting that number at 1.043 billion bushels instead.

World ending stocks for 2019/20 painted a similar picture, with analysts underestimating USDA’s tally for corn and wheat stocks while overestimating the agency’s soybean totals. USDA now puts world corn stocks at 11.913 billion bushels, soybean stocks at 3.498 billion bushels and wheat stocks at 10.575 billion bushels.

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