Stocks report surprises
Trade talks with the Chinese are scheduled to resume on October 10th with the Chinese Vice Premier meeting in Washington with U.S. representatives. Chinese officials are quick to point out they have purchased over 35 million bushels of soybeans tariff free and significant purchases of U.S. pork. U.S. officials are waiting for confirmation of said purchases.
For the third time, China granted tariff exemptions to seven U.S. companies on soybeans. Rumors in the market are that seven cargoes were traded earlier in the week with another 8 to 10 cargoes of soybeans traded. With shipments for November through January out of the Pacific Northwest and Gulf.
Last Monday’s corn stocks data showed the largest deviation in history, pushing corn and soybeans well into double digits gains for the first time in weeks. The last sizeable difference was in 2012 at 138 million bushels, with the carryout reported at 824 million bushels and the December contract closing at $7.16, a limit higher move of 40 cents.
The report pegged corn inventories at 2.114 billon, 331 million below the September report and 304 million below the average trade estimates. Looking deeper into the feed/residual usage for corn, ending stocks would potentially imply the second largest summer feeding use ever. To meet the feed/residual usage in the USDA balance sheets, feed use for the 4th quarter will need to increase 40 percent more than any fourth quarter on record or the yield for 2018 is potentially overstated by 2-3 bushels/acre.
Soybeans were favorable with stocks pinned at 913 million, plunging 92 million versus the September report and 68 million less than expected by trade. This is due to 1/2 million fewer planted acres and reducing yields by a bushel. With the reduction in soybean stocks, assuming a much smaller export number, carryout figures are much more realistic and far from the one billion mark earlier in the year. That being said, the U.S. is still far from anywhere near a rationing point of a carryout near 500 million.
Weather in South America remains dry, which is delaying progress with soybean planting. Analysts’ aren’t concerned about the crop being planted but more on how it will delay harvest. The dryness in Brazil could potentially lower production in South America and help the struggling U.S. export program in the aftermath of the Chinese trade war and African swine fever.
FC Stone released estimates for this year’s crop, with the national corn yield at 169.3 bushels per acre. This is up from 168.4 bpa in September and the USDA’s number of 168.2 bpa. Placing production at 13.887 billion bushels, which is 88 million bushels above the USDA number. Soybeans were pegged at 48.1 bpa, down from last month’s 48.3 bpa but still above the USDA’s September figure of 47.9 bpa. This places production at 3.648 billion bushels, still 15 million bushels above the USDA figure.
International Grains Council lowered global corn production by 1 million metric tons to an expected production of 1.099 billion tons. This was some needed good news, but the ceiling on the corn market continues to be on the demand side of the equation as exports continue to be minimal along with reduced ethanol production. Until those issues are addressed, there will be continued resistance in the corn market. Nearby basis levels remain firm across much of the Midwest.
For more information, you may contact Kristi Guse at (712)-260-6486, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Kristi Guse. 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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