This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
It’s been a while since USDA chopped our legs out from under us, so I guess we were due. Stocks reports have seen some pretty big surprises the last few years. Most analysts were looking for USDA to trim carryout a bit and possibly lower last year’s yield. But USDA raised carryout by 173 million bushels. It was the second-biggest bearish surprise since 2010 (second only to last year). They did lower the size of last year’s corn crop, but only by reducing harvested acres, not yield, like many had expected. They also lowered feed/residual demand, which was certainly needed. The increase puts old-crop carryout above the psychologically important 2 billion-bushel mark. It also adds more buffer onto the new-crop carryout. What it does not do is add back any of the lost production in Europe from the heat or drought, add any additional bushels of corn in Brazil for ethanol or export, or help get bushels out of Ukraine. The funds were loaded up on the long side, and headlines are getting stale. They got spooked by the report Wednesday, but the last few pullbacks we have seen were quickly bought by end users. That is not a guarantee that will happen with this one, but there is still a lot of tightness in the corn balance sheet and a lot going on in the world that has not been addressed.
The report Wednesday was fairly bullish for both soybeans and wheat, but neither could overcome the selling pressure spilling over from corn. On soybeans, USDA found 10 million fewer bushels than its last estimate of carryout, putting final carryout at 315 million bushels.
Harvest in the Midwest has been delayed by rain. Overall, U.S. corn harvest progress as of Sunday was estimated at 18%, which is right in line with the five-year average. Soybean harvest was also in line with the five-year average of 17% complete. But the national stat is a little misleading since harvest in the Mid-South and Southeast is ahead of average, but progress in the Midwest, where a majority of the production is, is behind average. Iowa is only 3% complete on bean harvest and 5% on corn, compared with 17% and 10% on average, respectively. There is a window in the next 10 days where the models show a break in the precipitation. It seems at this point it will be more of a quality issue than a yield issue, but that can change. Planting progress is moving along in Brazil so far. We have not seen a big negative effect from the super El Niño yet, but there is still a lot of growing season ahead.
Money flow will determine where we go from here. Funds sold beans on Thursday as soybean oil was lower, and we have not seen any new Chinese purchases of beans since the Trump/Xi meeting. There was some buying in the corn futures market Thursday late session that helped December corn close back above $5 after trading below it for most of the day. USDA added a buffer in the corn balance sheet, but not enough to ignore yield loss in the U.S. The world balance sheet is still tight on corn and even tighter on beans. We will get USDA’s updated new-crop yield estimates next Friday, Oct. 9, at noon.