Brooks Schaffer Market Report for Tuesday October 3

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

The September stocks report has a history of dealing the market surprises but despite what it seemed like after looking at the market closes on Friday, the stocks report did not hold any major surprises. Corn stocks came in a little below expectations which should have been mildly bullish. Bean stocks came out a little bit above expectations which was a little bit bearish and wheat came out right in the middle of expectations. 

It was not the stocks report that dealt the market the biggest surprise, it was the small grain production number where the shock came. Wheat production was estimated well above even the range of guesses before the report as wheat yields in several states were revised higher. 11 states produced record wheat yield this year. Certainly worth noting that we produced much more wheat than expected but wheat stocks were what the market expected so that means that all the extra wheat that was produced has already been used (mostly in the feed channel). After the report was released, wheat led the selloff with beans close behind and all the selling pulled corn down with it. Adding to the selling pressure was the end of week, end of month and end of quarter positioning. We also were staring down a government shutdown as it looked like almost all possibilities had been exhausted to keep the government funded. Ordinarily a government shutdown is not this big of a deal for the grain markets, but we are in the middle of harvest on a crop that we have a lot of uncertainty over. The October Supply and Demand report is coming out October 12th at noon and there are USDA enumerators out in the field right now weighing ears and kernels to try to get more data for the report. It would not have taken a very long shutdown to miss enough data that we wouldnt get the Oct report and would have continued flying blind. I cannot stress enough how important this October crop report is. We expect USDA to further trim yields in both corn and beans. 

Harvest continues to outpace the average with USDA reporting corn at 23% harvested this week compared to 15% last week and five year average of 21%. Soybeans are ahead of the average but not as much coming out at 23% this week compared to 12% last week and five year average of 22%. 

Corn gained back report day losses on Monday and wheat made a valiant attempt to gain back some of its losses as well. Beans struggled more but were able to close the day up. The selloff has done some damage to the charts on beans as harvest pressure hits beans harder but it was good to see support put in with the positive close. We have much tighter balance sheet on beans than corn so they will continue to be more volatile. South American planting is right on the 5 year average and the models continue to disagree about how much moisture is coming in the next 10 days. Market will be closely watching and if it falls behind we will see a quick reaction by the market and probably by China making US purchases.