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USDA: Sept. crop report bearish

By Staff | Sep 21, 2018



Corn and soybean producers across the United States were met with bearish news for both commodities with the USDA’s September supply and demand report.

The report, released Sept. 12, revealed corn yield bushels were set at 181.3 bushels per acre – higher than other pre-report estimates and higher than ag economists had predicted.

Todd Hultman, marketing analyst at DTN, said this figure created bearish estimates for both U.S. and world estimates.

“One hundred eighty-one bushels per acre in the yield gives us a crop estimate of 14.8 billion bushels. That’s a big crop for this year, and it will be challenged,” he said. “But we are getting close to the time of year when these estimates are getting a little more accurate.”

The USDA soybean yield estimate of 52.8 bushels per acre, up from 52.5 bu/a, was not a surprise.

“If true, that will be a record soybean yield for 2018 also,” said Hultman. “With that higher yield (the total crop) comes in just under 4.7 billion bushels … obviously, that’s a new record crop, and there is probably not a lot of argument in that number based on what we’re hearing.”

The USDA predicts higher new crop corn ending stocks estimates of 1.77 billion bushels, up from last month’s estimate of 1.68 billion bushels.

“Given the big crop it’s new a huge increase, but higher nonetheless,” Hultman said, adding that soybean ending stocks are also up from 785 million bushels last month to 845 million bushels this month, the highest in 11 years.

He went on to say that world-ending stocks for corn increased from 155.5 mmt to 157.03 mmt.

“That’s because of expected higher U.S. production,” he said. “Ukraine’s crop came in the same, and estimates from South America won’t matter as much because they haven’t planted their crop yet.”

This month’s figures for ending stocks dropped somewhat from last year’s 194 mmt., but Hultman said demand has not changed.

Additionally, as of Sept. 11, the corn basis is 44 cents under the December contract, a five-year low.

As exports go, Hultman said 452 million bushels of new crop corn has already been purchased, up 21 percent from one year ago. One reason for that is from the drought in Argentina this past growing season.

He added cash corn prices usually dip in early October, but due to the expected higher yields this year, that may slide into November.


According to Hultman, Brazil just experienced a record crop, and now the U.S. is expected to have record soybean yields as well. It’s the sixth consecutive expected record U.S. soybean yield.

“We do expect soybean supplies to build, but we don’t have a handle on U.S. soybean demand because of the trade war,” he said. “It’s something we can’t compare to other years and hard to predict (when it will end).”

In the meantime, it’s hard to estimate what the demand will be for the upcoming new crop season, and if that can’t be estimated, it’s hard to estimate ending stocks.

Nevertheless, USDA says there will be ending stocks of 845 bb of new soybeans in the U.S., with world-ending stock estimate figures coming in at 108.3 mmt.

“Similar to corn, that comes largely from an increase of the U.S. crop estimate,” said Hultman, adding that the figure for world soybean demand was reduced from 353.6 mmt to 353.01 mmt.

He’s concerned about that because China is usually dependent upon U.S. soybeans imports from October to February, and he wonders how they will react in purchasing practices.

Hultman believes the USDA thinks China will keep up its usual purchase pace, but did reduce China’s expected purchases by 1 mmt. Other analysts feel the reduction in purchases will be far more drastic than that if China tries to avoid the U.S. market.

The soybean basis is “not in good shape,” with the Sept. 11 cash price set at $7.32, one full dollar below the November contract.

According to Hultman, the seasonal low for average soybean basis comes about the third week of October to early November.

“We still have a ways to go before we can expect any leveling off of this cash predicament we’re in for cash soybean prices,” he said.

New crop soybean sales so far come in at 510 mb, down 10 percent from one year ago.

“Let’s not read much into this because some of those new crop sales could be canceled or how the year will play out,” he said, adding that the November to March spread shows March contract trading 26.5 cents above November – a bearish sign of commercial demand.

“That’s understandable when we have a record crop on the way,” Hultman said. “They’re in no hurry to buy beans right now.”

The one ray of sunshine for the soybean market this year is in demand for soybean meal, following the drought in Argentina, which is typically the highest exporter of soybean meal.

“This is true even if it’s hard to see it in the soybean price right now at harvest time,” said Hultman.

Soybean crush is also positive, he said, with incentive to crush it into meal and oil being the highest it’s been since 2001.

Another bright spot in the soybean market is the demand from other countries for U.S. soybeans after China stepped away from the market last July.

“Our soybean exports in July actually increased from 85 bb to 125 bb, and a big player in that increase in demand was from Egypt,” Hultman said. “They are not a customer we would typically think of as a buyer of U.S. soybeans, but they actually made up more in their increased purchases than China cut back during July.”

Part of the reason, Hultman said, is due to the fact that China’s tariff has made U.S. soybeans a “fire sale” for soybeans around the world.

“The opportunity for cheap prices in the U.S. has brought in customers that don’t normally come in the door for our soybeans in this big of a way,” said Hultman, adding that since the November price has fallen under $9/bu, more commercial interest has come into the picture slowly for the long side of soybeans.

“That’s a good sign that commercialists are finding value at these cheap soybean prices, so commercialists are our best hope for support in this market at this time,” he said. “It doesn’t mean they’re ready to bid them up to $10, but my suspicion is that we’re getting to the low end of what we’re going to see here soon.”

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