November 9, 2016
U.S. corn and soybean markets fell sharply after USDA on Wednesday raised production and yield estimates for the two crops, with corn now at a record 15.23 billion bushels and soybeans at a record 4.36 billion.
Those numbers plus record average yields of 175.3 bpa for corn and 52.5 for soybeans topped average trade forecasts. The trade, on average, expected a minor reduction in the corn crop and a smaller increase in the soybeans.
The production increases raised ending stocks with corn’s now at 2.4 billion bushels from October’s 2.32 billion and soybeans at 480 million from October’s 395 million.
Corn futures traded about 10 cents lower near midday and soybeans about 22 cents lower.
USDA report forecasts 15 billion corn crop. (Photo: Vstock LLC/Thinkstock)
“It’s hard to find anything positive for prices in today’s USDA report. We expected an increase for soybeans, though not as big as USDA found, with most of those bushels winding up on the bottom line for carryout too,” said Bryce Knorr, Farm Futures senior grain analyst. “Demand could be a little better – it’s still early to be lowering crush based on only one month of data, and exports could wind up better than expected if Chinese buying stays strong.”
USDA did raise soybean exports a little to 2.05 billion from October’s 2.025 billion, but it lowered the crush to 1.93 billion from 1.95 billion.
The increase in corn production was contrary to normal, said Knorr.
“Even with a modest increase in demand there’s way too much. That was true before the report and its true afterward. The best hope for a rally now may not come until February or March, when we start talking about acreage for 2017,” he said.
For corn, USDA achieved the higher crop by raising the average yield in a number of states including Iowa, Minnesota, Nebraska, North Dakota and Ohio. For soybeans, yields increased in Iowa, Kansas, Nebraska, Wisconsin and others.
South American weather may be one variable for crop supplies that traders will be watching. Brazil has had good rains this season and while USDA left that soybean crop unchanged at 102 million metric tons on Wednesday that is still bigger than the previous harvest of 96.5 million.
Argentina probably has had too much rain and that could cause some problems there. USDA left Argentina’s corn and soybeans unchanged at 36.5 million and 57 million metric tons, respectively, from its October report. However, those numbers are up from the previous harvests of 29 million and 56.8 million.
“If that (rain) delays corn planting it could lead to more soybeans going in, something farmers there don’t really want to do,” said Knorr.
Wheat futures moved lower with the corn and soybeans as USDA offered little fresh news for that crop. Production was unchanged at 2.31 billion bushels, and exports stayed at 975 million. Ending stocks inched up to 1.143 billion bushels from October's 1.138 billion due to a minor reduction in food use.
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