This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Corn market spent most of the week trading around the $5 level on the December contract. There was some more follow-through selling on Monday, but we got a strong dose of turnaround Tuesday as corn, wheat and soybeans all rallied double digits on Tuesday. Monday after the close, we got USDA’s harvest progress update showing harvest has fallen much further behind average pace. The national stats mask the delay a bit since the Midsouth and Southeast are well ahead of pace on both corn and soybeans, but in the Midwest, and especially the western belt, is where the delays are most acute, and those areas produce much more of our national crop. Iowa was estimated at 5% complete on soybeans compared to 38% on average. On corn, Iowa was estimated at 7% complete compared to 20% on average. Nebraska, South Dakota, Minnesota, Wisconsin and Michigan are all also well behind average. That area has been inundated with rain for the last few weeks.
Right now, the market is more concerned about quality implications rather than significant yield losses, but that could change. There is a window now opening up to get seven days without rain for the areas that are the most behind, so rest assured farmers will make the most of the window and try to make up as much ground as possible. Everyone will be watching next Monday’s update very closely. There was also some optimism that we would see some more Chinese purchases as they return from holiday this week. Trump, at a rally in Nebraska, talked about big Chinese purchases, but it was unclear if he was referring to something new or the previous agreements. Ethanol production rebounded this week and came in above expectations. We are coming out of the seasonal downturn in production as the new crop starts to fill the pipeline and get to the plants. Ethanol margins are good, and stocks were lower than expectations, indicating continued strong demand.
Traders were positioning for USDA’s October Supply and Demand report that comes out today, Friday, Oct. 9, at noon. The October report can be a big one as we have some harvest data now to incorporate into the estimates. The average expectation is for USDA to trim corn yield by seven-tenths of a bushel to 177.8 bushels per acre. Traders are looking for bean yield to be left unchanged, but there are fairly wide ranges of estimates. Anecdotally, early bean yields in the Midwest seem to be very good, but it is early, and anecdotal self-reported yields are far from a dependable measure.
This USDA report may set the tone of the market for the next few months. I think that statement is just a little less true this year than in some years past. This year, we are also facing very strong demand and also a lot of turmoil in the outside markets that is driving money flow. USDA really kicked us in the shins with the stocks report, but December corn managed to hang out around the $5 level and November beans around $13. There is strong buying interest at these levels, keeping the markets supported despite the harvest selling pressure. If this supply and demand report today is really bearish, the market may have a hard time holding support. But something could also happen in the outside markets anytime to offset. There is a lot more risk in the market right now than some years past.