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A bullish surprise

Quarterly stocks and small grains summary moved the markets

By Kriss Nelson - Farm News editor | Nov 2, 2020

A bullish surprise

Quarterly stocks and small grains summary moved the markets



What was supposed to be a quiet quarterly stocks report for Sept. 1 turned into what analysts are describing as a “bullish surprise” that brought all three grains: corn, soybeans and wheat to instantly trade sharply higher.

The report, which was released Sept. 30 typically isn’t one for surprises.

“Our expectations going into today, looking at pre-report surveys, it was supposed to be a ho-hum report,” said Todd Hultman, DTN lead analyst. “We were supposed to see a September 1 corn and soybean stocks total very close to the ending stocks estimate that USDA just put out a couple of weeks ago on September 11, but that is not the case.”

Corn stocks

Hultman said analyst expectations were looking for a 2.24 billion bushel (bb) of corn stocks on hand September 1. But that was not the case.

“USDA said they found only 1.995 billion bushels. That’s 248 million bushels less corn than analysts expected to see today,” he said.

USDA made a note on the report, revising their corn production estimate up from 2019 to almost 3 million bushels (mb) from 13.617 bb to 13.62 bb.

“This is a bit unusual,” he said. “They tweaked the production estimate higher which is unusual. We don’t often get a note like that in the quarterly grain stocks report, but if that is the production estimate, it leaves us wondering what’s the explanation for the lower corn stocks that were actually found on hand September 1? We won’t have USDA’s explanations until the October WASDE report.”

Hultman said it appears USDA is putting the burden of change on the demand side of the market for the 2019-2020 season.

“That’s the early guess,” he said. “But, nonetheless, USDA did find less corn on hand September 1 than what was expected.”

That announcement made corn prices instantly spike 15 cents.

What does this do to the ending stocks to use ratio?

Hultman said the September 1 quarterly stocks total is the ending stocks number for the 2019-2020 season. The ending stocks to use ratio works out to roughly 15%.

“It’s basically in line with what we’ve seen the past three years,” he said. “It’s still a plentiful supply as far as corn goes, but, also, keep in mind that today’s lower total also brought the new crop estimate down slightly and for the 2020 season, that ending stocks to use ratio has come down to 16 percent.”


Analysts, Hultman said were expecting USDA to find 575 million bushels (mb) of soybeans on hand on September 1, but USDA actually came in under that amount.

“They only found 532 million bushels on September 1. That also is an ending stocks figure for the 2019-2020 season,” he said. “That’s a bullish change for soybeans coming in 52 million bushels less than the trade was expecting.”

That also tightens up the ending stocks to use ratio for the soybean market a bit.

“In the 2019 season, that ending stocks to use ratio is down around 13 percent now,” Hultman said. “But, it also drew the new crop ending stocks to use ratio down to 9 percent, so, we are getting to a tighter estimate, closer to 400 million bushels of ending stocks for the 2020-2021 season. It is becoming a tighter supply situation all of the time.”

Hultman said not only is there a very active export sales currently happening, the USDA gave the market a little more bullish help with a lower September 1 stocks finding. Soybeans were trading 34 cents higher after the report.

“All we can see, basically at this time, it is very bullish for corn and soybeans, but again, we don’t have USDA’s explanations of how that break down is going to look,” said Hultman.

More explanations, he added will come from the USDA’s World Agricultural Supply and Demand Estimates (WASDE) report on October 9.

“We have more to learn about the 2019 production estimate,” he said. “It could have been too high as we contended all last winter, but there is no confirmation of that yet.”

One thing that made estimating ending supplies difficult in the year that just ended that 2019 season, Hultman said was the hit of coronavirus in March.

“That made it very difficult to keep a handle on just what happened to those corn supplies,” he said.


Hultman said he was recently invited to participate on a panel from USDA asking for recommendations on what the National Agricultural Statistics Service (NASS) could do to improve and make their estimates better.

“I think of all the things they do, the quarterly grain stocks report is the most important because it is very practical,” he said. “It is very easy to conduct. It’s obvious whether the grain is there or not. It doesn’t rely on a lot of estimating or predicting and it’s not hard information to gather.”

These quarterly grain stocks reports, Hultman believes helps to keep USDA WASDE estimates honest.

“It is much more difficult to estimate how much crop there is in a field, what kind of yield is going to be had, how demand is going, what feed demand is looking like –all of those things are much more difficult to estimate than simply getting a periodic total of grain supplies at hand,” he said. “So, I continue to be a strong proponent of these stock estimates and I think we are going to find, once again, it is going to be the stocks numbers that correct past prediction errors that we find in the estimating process.”

Today’s September quarterly stocks and small grains report, Hultman feels brought a little bit of good news.

“Or, at least helpful news for corn and soybean producers to finally see the lower inventory totals,” he said. “Of course, this conversation will go back to last year’s crops estimate for 2019 and I am sure there is going to be a lot of discussion about that.”

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