Blogging by the Bushel
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Well, another report party is over and it provided grain producers little to want to celebrate, at least in respect to the price outlook. Now we can begin to focus on the October figures.

Corn

Realistically, there was nothing at all outlandish in the corn report yesterday but certainly nothing positive or even something less bearish than expected like in the August figures.

The headliner is always the yield, which was 1 bushel above report estimates at 171.7.  Really a pretty insignificant difference but of course would be a new record eclipsing the current by 4.2% and they still left room for additional increases in future reports.  Yes there are record population counts and record ear counts but not record ear weights for many states were it would seem likely. Regardless, the net result was an increase of 363 million bushels of production to 14.395 billion bushels.  While a producer in areas that have experienced less than ideal conditions this year might argue with this number, it has not produced much controversy in the industry but the same cannot be said for the usage estimates.  Feed/residual was pushed up 75 million to 5.325 billion, the highest number in seven years, ethanol was bumped 50 million higher to 5.125 billion matching the record set last year and exports were boosted 25 million to 1.75 billion bushels. While economics 101 would tell us that lower price should stimulate additional demand, these assumptions could be difficult to defend.  The five-year average for feed/residual is 4.8 billion bushels, ethanol while profitable today could be facing headwinds from a growing world inventory of crude oil and the uncertainty of the mandate and exports may be hindered by the rising dollar.  The point is, with these optimistic usage numbers, additional increases in production would like add directly to the bottom line.  Speaking of which, ending stock did crest the 2 billion mark and are currently projected to be 2.002.

World ending stocks were bumped up just 2.09 MMT.  To arrive at this number Argentina was cut 3 million, China 5 million and Ukraine and the FSU 2.5 million to partially offset the increase in the US of 9.24 million, Brazil 1 million and the EU for 1.3 million.  Regardless, the figures does set a new record for raw ending stocks by 16.83 MMT and the highest stocks/usage ratio at 19.56% since the 2001/02 crop year.

As we are aware, this sent prices into new lows again yesterday but hardly what you would consider a panic wipeout.  There remains a few minor concerns about cold temperatures over the next 24 hours but in lieu of these figures, I cannot imagine we could see much of a response even if there were frost to the north and west.  For now, any short-term rallies would appear to be for the selling and those measuring targets at 3.00 that seemed so extreme when prices gapped lower back around the 4th of July, now appear realistic.

Soybeans

As with corn there was really nothing shocking in the bean estimates but neither was there anything that would suggest we have reached a low.  The most positive figure in the entire report was that for the 2013/14 crop year the USDA bumped crush and exports 5 million bushels each so we brought in 10 million less that previously thought. After a year of touch and go inventory, no one batted an eye.  Yield was increased 1.2 bushels to a record 46.6 b/p/a pushing the total production up top 3.913 billion bushels, 97 million higher than last month.  This of course falls short of some private estimates that have predicted a crop 4 billion.  While not impossible on future reports, yield would have to push up another bushel for that to turn into reality.  Total usage was boosted 42 million bushels broken down with an increase in crush of 15 million bushels to 1.77 billion, the highest number since 2007/08 and 25 million in exports to a record 1.7 billion.  Residual was increased 3 million so the net result was an increase in ending stocks of 45 million to 475 million.  This would be the largest carryout since 2006/07.

On the world accounting sheet, in addition to an increase in US production, the Argentine crop was bumped up 1 MMT and Brazil 3 MMT with the net result after adjustment for usage an increase in world ending stocks of 4.55 MMT.  This leaves us with a record 90.17 MMT in ending inventory, which eclipses the previous record set in 2010/11 by 18.45 MMT.

As with corn, beans fell into lower lows but did not witness a panic collapse to the downside and have even tried to bounce a touch this morning.   November futures have reached down to what were my initial targets at 9.80 but I suspect holding at this zone will only be temporary.  Not only are we on the cusp of full-scale harvest here but also South America will soon be moving into the field and as I reported yesterday, it would appear the plans are to increase bean acreage at the expense of corn.  Granted, that would not assure a bigger crop but without any issues, we would be staring at a bleak outlook indeed.  Prior to the report I had felt that the downside of the bean market could be limited to the 9.50 level but with growing numbers and potential for another large southern hemisphere crop, I believe I need to expand the downside potential to the 8.80/9.00 realm.

Wheat

Personally I thought the wheat market received some of the most negative information.  Imports into the US were boosted 10 million bushels moving them back to the same levels as last year and exports were cut 25 million bushels reflecting the current non-competitive position of US product which pushed ending stock up 35 million bushels to 698 million.  If correct, this number is 108 million higher than last year but still 20 million lower than the 2012/13 marketing year.  Actually, this is still the second lowest ending stocks figure since the 2008/09 marketing year as the average for the past five years has been 778 million.

The world numbers were no more encouraging.  The Australian crop was cut .5 MMT but the EU booted 3.1 MMT and Ukraine 2 MMT.  Of course we know that there is a lot of off grade wheat from those two regions, which discounts the price even more.  The Russian crop was left unchanged at 59 MMT and many private estimates have pushed projections into the 61+ MMT range so the world ending stocks could very well grow even more on successive reports.  As it turned out with the current number, carryout was bumped up 3.42 MMT to 196.38.

This boost does not quite return us to the type of world carryout number that we were living with between 2009 and 2011 that ranged between 199 and 201 MMT but the information was still enough to push us into new lows once again.  Realistically, there is little in the way of support between the current price and the lows that we posted back during in 2009 and 2010 down at the 425 level.  If the USDA finds more wheat on the October report, it would not seem unreasonable to see prices return to that range.

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