This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
You would not have guessed it from the close on Friday or Monday, but the USDA report Friday was very friendly for beans and also friendly for corn. USDA dropped soybean yield by a whopping 1.4 bushels. That is the largest ever drop from the October to November report. Most of the yield drop came from “I” states, with only Indiana having a yield increase. That drop in yield, and no changes in demand, drops US carryout from 550 million bushels down to 470. That is still a significant cushion but it was lower than even the lowest guesses and is going the right direction for the bulls. The soybean market spiked up rapidly after the report was released but could not hold the strength to the close. Friday was yet another reminder to the importance of having resting orders working when you have sales you need to make. If you had orders working, you probably got fills. If you were just going to watch the market and do it later, you may have missed your chance.
USDA was not nearly as aggressive making changes to corn. They dropped yield but only by 7 tenths of a bushel on corn to 183.1. USDA was very conservative in making demand adjustments as well but the change in yield brings carryout down a little more below the all important 2 billion bushel level to 1.938 billion bushels. Despite the fact we are well ahead of last year’s record pace on corn exports, USDA left corn exports unchanged. They may be anticipating that pace slowing significantly later but that is a category that has a chance of really shaking up the corn balance sheet. Ethanol grind is also ahead of pace needed to reach USDA’s target but not nearly as far ahead as exports.
The USDA rarely (if ever) makes changes to yield on the December report. The December report mainly gives us changes in South American production and demand. The next chance we have to see big changes to the US crop will be when we get the January supply and demand and stocks report. Having an actual count of US stocks, will give USDA more information to estimate the final crop size and demand pace.
Until then we will continue to trade demand and South American weather. Brazilian producers have now caught the 5 year average planting pace despite the late start. Weather in the 7 day forecast looks nonthreatening. That is weighing on beans despite the strength in palm oil pulling bean oil along with it. Some models are drying out in the 10-15 day but the market will not put much stock in that until we get closer. Forecast is just too uncertain that far out. If the weather stays non threatening in Brazil, beans have downside risk. The funds have bought their shorts back and building a small long position in corn. Corn has a much more compelling bull case than beans right now as supply shrinks and demand grows.