USDA report numbers below expectations
Corn and Soybeans closed higher Thursday following some friendly numbers from the USDA. Corn yield was lowered to 180.7 BPA, which was down .6 BPA from September. Total production was lowered to 14.778 billion bushels, down 51 million bushels
On the soybean side the USDA numbers weren’t quite as bearish as anticipated. The projected soybean yield of 53.1 BPA is just 0.3 higher than last month. Harvested acres were lowered by 514,000 to 88.348 million acres, which lowered production 3 million bushels from September at 4.69 billion bushels.
Carryout figures came in higher than the September estimates for corn and soybeans but still below what trade was expecting to be reported. The corn carryout figure is now estimated at 1.813 billion bu., 106 million bu. below the average estimate. The soybean carryout estimate came in at 885 million bu., 13 million bu. below expectations.
Excellent corn export inspections came in again last week at roughly 53.2 million bushels. Trade is under the belief that we could very well see a revision higher as we have seen heightened exports recently. Soybean export expectations came at the lower end of trade estimates with roughly 20.9 million bushels. This would be also be down from the prior week’s inspections of roughly 23.2 million bushels. 41.1 million bushels is need per week to meet the USDA’s forecasted amount
Despite the poor profit margins seen in ethanol, production figures last week increased. Ethanol manufacturing data for the week ending October 5th, showed an increase of 25,000 barrels per day at 1.04 million barrels. Ethanol stocks were reported at 24.02 million barrels, up 576,000 from the prior week.
Export sales for corn last week fell within expectation but at the lower end of trades estimates at 39.6 million bu. Soybeans sales were expected to fall between 19-48 million bu., but actual sales totaled 16.2 million bu. below expectations. Wheat sales were also on the lighter side at 12.5 million bu.
U.S. soybeans export offers remain competitive to China including tariff rates over Brazilian shipments. This has not been of interest to the Chinese and will probably not win back export business in the short term. Brazil’s currency rose sharply as the first round of elections there put the conservative candidate in a strong lead. If this candidate were to win the election in the second round later in October, it would be friendly to U.S. soybeans as their policies would push for a stronger currency and weaken prices paid to Brazilian farmers. A key factor for Brazil to aggressively export beans into China has been the weak relationship between their currency and the U.S. Dollar.
The Farm Bill quietly expired on September 30th, however farmers will still have the protection of the traditional farm safety net, because most of the commodity programs are tied to the crop year. The 2018-19 marketing year, the last year covered under the current farm bill, covers through next May for wheat and August for both corn and soybeans. The four lead farm bill negotiators, the chairmen, and House and Senate agriculture committees, say they plan to continue working on an agreement even though they still remain divided on several issues. The earliest Congress could consider a deal is after the mid-term election in November; however some are speculating that it is likely to be December when Congress gets ready to shut down, before lawmakers pass a new farm bill or an extension of the expired law.
President Trump, has ordered the EPA to lift the summertime ban on E15. This headline is considered a positive, but many in the trade realize that changes to the balance sheet are yet to be seen. The pump infrastructure for higher blends of ethanol are still not at the level that those within the industry would like to see. Many believe that ethanol exports is the realistic and practical approach to increase ethanol demand in the short term
World soybean supply data is also getting trade’s attention, with China importing only non-U.S. soybeans, analysts continue to speculate how long this will last. The firm Abiove released data recently stating they estimate Brazil’s soybean supply to shrink to 1.5 MMT this season, the lowest levels since 1999.
The extended forecasts are finally showing the Midwest what we’ve wanted to see. The updated 6-10 day forecast is showing below normal precipitation for the northern areas including most of the Corn Belt. Normal chances for the South Central areas. The longer 8-14 day forecast also showing drier conditions for all of the Northern Plains and Corn Belt. Once field conditions become suitable, harvest progress should rapidly advance.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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