USDA Quarterly Stocks Report – September 30, 2020

Another bullish surprise from USDA! The Sept quarterly grain stocks is the final carryout estimate for the previous crop year. USDA is supposed to get a physical count of all the bushels in the country, and then we will know how much will be carried into the next year. This final count reconciles all the estimates they have been making all year. Last year we suspected all year that yields were lower than what USDA had been estimating. They dropped the corn carryout from 2.2 billion to just under 2 billion which means either we were right about yield, or demand was much stronger than anyone anticipated. I think it more likely that the former is true. Now we have to take 200 million bushels off the carryout for this year bringing it down to 2.2 billion. Now it doesn’t take much yield adjustment to get it below 2 billion and there is still a lot of uncertainty on yield. This is finally a gift from USDA to correct a wrong that we have been suffering for a year now.

Soybeans were adjusted in the same direction but just not as much. Also stronger than expected soybean demand could be partially responsible for the supply loss since demand has remained very strong compared to corn. Every bushel we take off last year’s carryout has to come off this year’s as well and soybeans have had less of a buffer than corn. Forecasts have remained dry in South America and the funds continue to buy. Where beans go from here depends greatly on South American weather.

Wheat came into the report getting stronger due to dry weather in Russia. Wheat has not been trimmed down to the point of tightness yet, but a weather problem is enough to spark buying and this adds to the momentum. Strength in corn and weakness in the dollar are all contributing.

What To Do
You need to be selling old crop corn and beans on this bounce! We are making new highs in corn and have not quite gotten to the highs in beans but have orders working! The last two weeks have shown us how quickly beans can get below $10 if there is nothing feeding the bull market. Yes it can go higher if there is continued dryness in South America, but it will also fall if not. SELL OLD CROP CORN AND BEANS

Work orders on new crop. Corn is approaching $4. Work orders just below there to get new crop corn hedged. Work bean orders just below $10. We have a ways to go to get there but as we see more weather in South America the market will start putting more emphasis on new crop US beans.

Work orders on new crop wheat just below $6. There will be a lot of acres coming into wheat next year in the US if prices stay close to where they are now. $6 wheat hedge should be $7+ milling wheat delivered depending on your local market. That needs to be protected. Sell old crop wheat in this range.