September USDA Report

I know everyone is racing to get all they can prepared for the storm. There is still a great deal of uncertainty but I hope everyone stays safe. Please let us know if there is anything we can do. Train power has been pulled out of most of the southeast in preparation and feedmills have made all the feed they can in case they lose electricity. There may be big needs for corn once the storm has passed depending on the condition and ability of the railroad to return service. 

The major surprise on USDA report was corn yield. Market was anticipating a slight drop in corn yield based on all the private estimates but USDA raised it from 178.4 last month to 181.3. Early yield results have come in mixed. Market has reacted by trading down 14 cents on corn and down 16 on wheat. The world corn carryout number came in above the average guess but within the range for this report and still indicates a huge drawdown from last year and the tightest world ending stocks since the mid 1970’s. Despite todays action, we do not believe corn can afford to continue to trade too much lower as there is still rationing that needs to be done on the world balance sheet. We also need corn acres in South America which have to compete with South American beans. There were some news reports before the crop report indicating Washington had opened discussions with China regarding the additional tariffs scheduled to go into effect soon which has helped support beans. USDA raised bean yield as expected but absent the trade news, beans would probably have a harder time hanging on. We have a big crop in the US, but it is not in the bin yet. We have priced in no Chinese purchases and it remains to be seen where/how/if they can replace our soybeans. Wheat was fairly neutral, but USDA left Russian production and export estimates unchanged. Wheat is trading lower mostly in sympathy with corn. With threatening weather continuing to build and get worse in Australia, continuing dry weather in Russia for planting and Argentinian wheat locked tightly away, the world balance sheet looks friendly on wheat as well. 

In summary, the corn and wheat markets which fundamentally have the most upside potential take it on the chin today while beans who are building stocks in the world are managing to trade higher. We need to see more yields from the Midwest to confirm or refute USDA’s yield.