/This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Today is USDA report day! The October WASDE Supply and Demand Report comes out today at noon eastern. The October update will incorporate the stocks data we got last week as the old crop carryout on the balance sheets. USDA will also update their yield/production estimates for the new crop using the harvest data we have so far. The market is not looking for any dramatic supply side changes on this report. It feels like the market already had the positioning ahead of the report done by the close on Thursday. The market is looking for USDA to trim corn carryout to just under the all important psychological level of 2 billion bushels. They were just over 2 billion on the Sept report. Market is looking for soybean carryout to come in very close to the 550 million bushel level we saw in Sept. That is still a huge build from last year’s carryout of 340 million bushels. It is more than twice what we had in 2022 when we only had 260 million bushels.
On yield, the market is looking for a small reduction in corn and bean yields but the range of estimates includes both a small reduction and a small increase so the market does not have strong conviction of the direction of the change. The key is that we are only looking for small changes. Any big change will be a surprise and need to be priced in. We are only looking for very small changes to the world balance sheets as well. The average estimate is for small reductions to corn, wheat and soybeans but the range of estimates also includes small increases as well.
Soybean harvest is advancing very rapidly due to the dry weather. Many areas are reporting single digit moisture in beans. The market feels like we are starting to get a good handle on the crop size now and is starting to focus on demand and South American production.
On the demand front, exports remain strong and ahead of pace. Ethanol grind is starting to pick up as new crop makes it into the pipeline. Ethanol production was a bit higher than market expectations. The best number on the weekly ethanol report was stocks though. Ethanol stocks plunge to a 43 week low sharply below expectations pointing to very strong demand. Crude oil has been rallying along with the rising tensions in the Middle east which will help margins.
Soybeans have fallen from their highs as Brazilian rains are forecast to start in the next few weeks. Planting progress in Mato Grosso is the slowest in 5 years but it is not late enough for the lateness by itself to have a yield penalty for the soybeans. If the rains start in the next two weeks as forecast, planting will make a big dent in catching up.