Blogging by the Bushel
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Market Report

Thursday October 11th, 2018

December closed up 6 ½ at $3.69 ¼ and March 19 closed up 6 ½ at $3.81 ¼. November beans closed up 6 at $8.58 ¼ and January 19 closed up 6 ½ at $8.72 ½. December wheat closed down 2 ½ at $5.08 and July 19 closed down ¾ at $5.48. Crude oil closed down $2.22 at $70.81.

The USDA managed to flip the script on a market distracted by a continued “risk off” attitude across the financial spectrum.  Corn finished higher off of a monthly USDA report that likely couldn’t be considered “bullish” per se, but certainly was less bearish than expected. Managed Money funds were viewed net buyers of about 20,000 corn today, which would leave them net short just over 85,000 corn heading into tomorrow’s CFTC report.

Another month, another USDA report in the books. Unlike the prior three (Aug/Sept WASDE and Sept 1 Quarterly Stocks) universally bearish reports, this one leaned more in the neutral camp for corn. Defying the old trader adage of “big crops get bigger”, the USDA backtracked from their aggressive Sept yield projections, pegging it at a still-quite-large 180.7 bpa. This compares to 181.3 bpa in Sept and the prior record of 176.6 bpa in 2017. Despite 50 MB less production, 18/19 carryout expectations still inched another notch higher, pegged at 1.813 BB (versus 1.774 bil in Sept). This was due mostly to the inclusion of Sept 1 stocks data, which finalized 17/18 carryout at 2.140 BB versus 2.002 prior. The USDA continues to fine-tune demand expectations, down-ticking feed/residual 25 mil bu from prior, while increasing exports 75 mil bu from prior (to 2.475 bil bu vs. a final 2.438 bil in 17/18).

As expected, the world numbers were a virtual afterthought in the Oct WASDE. The USDA raised world carryout projections to 159.35 mmt, which compares to 157.03 mmt in Sept (and 198.2 last year). This was mostly due to the USDA raising initial carry-in (again, mostly a consequence of the Sept 1 stocks report). The only notable production downtick was non-Ukraine FSU (likely Russia)which was trimmed 1 mmt. As per usual, CONAB was out before the USDA in the early morning, offering their first glance at their 18/19 corn production expectations. They pegged total corn output for the year in a range between 89.7-91.1 mmt, which compares to the USDA’s 94.5.

Soybeans came into the day under pressure ahead of the crop report where the trade was anticipating a bear report. The report was bearish but not as bad as feared and beans benefited with a post report relief rally that was defended into the close.

Here’s what the report said. The USDA raised the soybean yield from 52.8 to 53.1 bpa compared to the avg. trade estimate of 53.3 bpa. They also lowered harvested acres by 600,000 to 88.3 million which offset the yield increase so production was off slightly to 4.690 bb where the trade was anticipating an increase to 4.730 bb. Beginning stocks were raised by 43 mb on a .2 increase in last year’s yield and a 24 mb reduction in residual use. The 18/19 usage stats were unchanged giving us a carryout of 885 mb, slightly below the 898 mb trade expectation.  In the world stats, there were no adjustments to the projected Brazilian and Argentine crops at 120.5 mmt and 57.0 mmt respectively. Chinese bean imports were unchanged at 94.0 mmt.  The world soybean carryout was raised from 108.26 mmt to 110.04 mmt. Midwest rains have finally cleared out and we are entering a welcomed dry stretch where farmers will get back out to harvest as soon as conditions allow.  Saturated fields and cool temps will test patience, particularly in the western half the of the corn belt.

Conab estimates the Brazilian soybean crop at 117.04 mmt to 119.42 mmt compared to 119.3 mmt last season. Yields are forecast at 3.302 mt/hectare, down from 3.394 last season.  Exports are projected at 75.0 mmt vs. 76.0 mmt last season.   They estimate the corn crop at 89.7 to 91.1  mmt combined with yields 5.408 mt/hectare, up from 4.890 last season.  Exports are projected at 31.0 mmt vs. 25.5 mmt last season.

Price action leading up to the report had a slightly negative bias. The thinking was, on one hand, how much of a slash in World production was the USDA finally going to give us. On the other hand, with the poor pace of export sales, how much of an increase in US ending stocks would we see. The initial knee-jerk reaction to the data was a shocking 12-cent rally. Some of this could have been attributed to somewhat friendly data coming out of corn and soy. Granted there was nothing overly bullish in corn and soy, but the report does probably tell you those September lows in corn are going to be really tough to take out, and the soy data was not nearly as negative as many thought, so we saw a modest bounce. The USDA did finally reduce World wheat production estimates, and thus we saw a slightly lower World carryout, but the larger concern is the growing US wheat carryout and the lack of demand. The rally was not very lasting, and trade spent the finally hour of the day trading lower. All three classes of wheat finished between two and three cents lower.

Anna Kaverman

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