This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.
We got USDA’s updated supply and demand numbers on Tuesday, Sept 12th at noon and there were no major surprises. When we look at USDA numbers, we always have to look at them from the perspective of what the market was expecting. So then the direction of the market after the report is the market pricing in the new information USDA has given us compared to what we were expecting. In the case of the Sept Supply and Demand report, the numbers USDA gave us were not overly bearish, but corn and beans closed lower because they expected smaller carryouts. But based on the new numbers, I look for corn and beans to remain in the same ranges we have been trading in and to work higher as we see harvest reports as we move into Midwest harvest.
For corn, USDA yield to 173.8 bushels per acre from 175.1 in the August report. That was a pretty significant cut in yield and reflects what they found when doing objective field measurements similar to the Pro Farmer crop tour. The objective yield estimates have done a much better job this year capturing the issues the crop has had this year. Satellite data based on plant health does not do a good job seeing reproductive issues like smaller ears and lack of kernel fill from the adverse weather early and late in the growing season. The adjustment on the corn balance sheet that offset the drop in yield was the addition of nearly 800,000 acres. USDA added these in based on the FSA data. Historically they do not adjust the acreage using FSA data until October at the earliest but often not until January due to incompatibility between the different computer systems. USDA did not make an adjustments to the demand side of the balance sheet which was a victory for the bulls as some were calling for USDA to lower demand estimates. So with the additional acres that leaves carryout still at a comfortable level of just over 2.2 billion bushels so no need for immediate rationing. However, the trend is clear now as we have seen the yield declines on the last several updates and expect it to continue to do so. I believe harvested acreage will also decline as we typically see in drought years as acres are either abandoned or chopped for silage. Dec corn was able to hold the low at $4.735 and rally off that. I look for that low to hold and corn to try into the low $5 range as we work into harvest.
On soybeans, USDA also dropped yield by 0.8 of a bushel giving us 50.1 bu/acre. They did not add enough acres to be consequential to beans and we were already running on razor thin carryout before they reduced yield. They had to get creative with the demand side of the balance sheet to keep from printing a number below 200 million bushels which is considered close to pipeline supplies. They did that by reducing exports and domestic usage. We can make a case for exports being lower since we are not going to have the beans to be able to export. The bean market is going to have to ration some demand. The bean market sold off after the report reflecting that they had expected USDA to be even lower on carryout but until we know more about the US crop and get further into South American growing season, soybeans are going to remain well supported. We are going to have to ration some demand on soybeans it is just a question as to how much and if price is going to have to do it alone. I look for beans to trade back toward $14 and much higher if we have any major problems in South America.
All in all, I am glad to have this report behind us. I expect yield and production to continue to trend lower on coming reports for both corn and soybeans. I look for the market to stay well supported on the downside, but for corn I do not see much potential for any explosive upside. Soybeans may be a different story. We will get USDA quarterly stocks report on Sept 29th and the October supply and demand on Oct 12th. We will all be watching for yield reports.