Weekly market review
The big news in trade for the week of August 12th was the release of the long awaited August USDA supply and demand report, setting the tone lower for much of the week. The agency reported that farmers planted 90 million acres of corn and 76.7 million acres of soybeans. Prevent plant acres were reported at 11.21 million for corn and 4.35 million for soybeans. As with almost every report, the trade is left questioning the data. With 11.21 million prevent plant acres for corn, it implies that farmer intentions were to plant a huge 101.2 million acres but were only able to get 90 million planted.
The USDA planted acres and the FSA certified acres were both released on August 12th. While the two sets of numbers never match, there is a usual gap between the two. About 3 percent of the acres planted to corn do not qualify for the farm program. With that said, the USDA could be one million acres too high on their planted acreage figure for corn.
Expectations were to see corn yield around 1 bushel per acre below the July estimates but the USDA also surprised trade with a higher yield. Their August estimate came in at 169.5 bushels per acre, or 3.5 bushels above last month. This put production over 700 million bushels larger than pre-report estimates at 13.901 billion bushels. New crop carryout now estimated at 2.181 billion bushels.
Expectations were for a decline in soybean yield of about one bushel per acre but the USDA left their forecast unchanged at 48.5 bushels per acre. The reduced soybean acreage leaves total production at 3.68 billion bushels, 165 million below last month. Despite the USDA reducing soybean production more than expected in Monday’s report, soybean futures have been weaker in recent trade. The latest carryout estimate of 755 million bushels is well below earlier estimates of nearly 1 billion bushels. Ending stocks would still be the second largest on record, limiting the reaction.
Crop ratings release Monday, August 12th showed corn condition ratings better than expected. The trade expected a slight decline, but were unchanged for the week at 57vpercent good/excellent. Pollination (silking) is catching up, now only 7 percent behind at 90 percent complete. Corn in the dough stage is 23 percent behind the average at 39 percent . This week showed 7 percent of the corn crop as dented. Soybeans were also better than expected with the trade looking for a one to two point decline. Soybeans rated 54 percent good/excellent for the 5th week in a row. Soybeans rated at 82 percent blooming, 11 percent behind average and now at 54 percent setting pods.
Chinese and U.S. trade negotiations escalated at the beginning of the month after stalled negotiations led to the U.S. adding additional tariffs to Chinese goods. This week, the U.S. Trade Representative’s office stated that further tariffs on certain items will be delayed until December 15th and other items removed altogether. This extension rallied stocks, as it will allow retailers to import goods without those additional tariffs in time for the holidays. This news also lent support to soybeans as they struggled to trade positive after a bearish USDA report for corn.
The National Oilseed Processors Association (NOPA) released their July soybean crush report this week. They reported that 168.1 million bushels were crushed in the month of July, breaking the previous July record set last year. The total was a large 20 million bushel increase over last month and near the high range of trade’s expectations. Record domestic soybean oil usage for July dropped stocks to the lowest levels in 15 years.
For more information, you may contact Adam Suntken at (712)-454-1061, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Adam Suntken. 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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