Brooks Schaffer Market Report for Friday October 13

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

USDA’s October supply and demand update came out yesterday at 12 noon. The October report is widely anticipated (and sometimes subject to surprises) because it includes harvest data on top of all the other estimating tools (surveys, satellite, objective yield estimates) that USDA uses on the earlier reports. Market had expected minor reductions to corn and soybean yields. Carry out from last year was reduced for corn from the stocks report so minor reduction to corn carryout was expected. On soybeans, USDA added to old crop carryout on the stocks report at the end of Sept, so the market expected carryout to increase a little even with a smaller yield.

USDA dropped corn and bean yields more than what the market was expecting. Corn yield came out at 173.0 compared to expectations of 173.6. Soybean yield was estimated at 49.6 compared to expectations of 49.9. This reduced corn carryout to 2.111 billion bushels from 2.221 last month and left soybean carryout unchanged from the Sept supply and demand report at 220 million bushels. This was bullish for the market that had expected an increase in bean carryout. Wheat came out almost exactly as expected. World numbers came out close to expectations with corn wheat and soybean carryouts all slightly less than the Sept estimates. USDA raised Chinese domestic crush in the report which was a bit of a surprise to the market too.

This report did not really fundamentally change anything yesterday. I expect yields to maybe get trimmed a little more but do not expect a drastic change. We have seen enough harvest to have a decent handle. Now we are going to work on pricing in demand and South America production. We are projecting just over 2 billion bushel carryout on corn which is tighter than it was but still not a panic to the market. Soybeans are very tight on the US carryout close to 200 million bushels so we will have to ration some demand but South America is going to plant all they can. If they have a good growing season, we could gain a decent buffer in beans on the world balance sheet.

US exports have suffered due to tensions with China as well as a strong dollar and logistic challenges. Low water levels in the Mississippi river as well as in the Panama canal have China hesitant to buy as much from the US. China also just worked out the phytosanitary certifications with Brazil in the last year and can now buy large quantities of Brazilian corn in addition to soybeans.