I was a bit nervous leading up to this report because of how bullish everyone was. We have had two bullish USDA reports in a row and everyone was leaning on the same side which makes me concerned. The numbers that USDA gave us were a bit of a surprise. Everyone was focused on yield and USDA only trimmed corn yield 0.1 bushels to 178.4 and left bean yield unchanged at 51.9. The market was looking for a larger reduction in yield on both corn and beans. The surprise came on acreage as USDA cut corn acres by 973,000 and cut bean acres by 720,000. It is acreage reduction that brought corn carryout down from 2.5 billion last month to 2.167 today. Bean carryout comes down from 460 mln bushels last month to 290 mln this month (down from 900+ in 2018/2019). World carryout on beans was trimmed significantly as well. Corn world carryout was down about what was expected. Wheat and cotton estimates were not changed enough to be of any consequence.
Corn
Corn is not standing on its own here, it is being supported in part by beans. 2.167 billion bushel carryout is not tight but it is a lot less than the 3+ billion bushels that was estimated earlier in the growing season so its all about perspective. The 3+ estimates were not wrong at the time they were made but it illustrates the point that the crop is not made until its in the bin. We were probably one rain away from achieving that or something close to it but the Midwest did not get that last rain. They also have not had hardly any rain since then either and the drought area has continued to grow. We did not fix our domestic ethanol demand but China came in and started buying. I have been saying sell for $0.50 cents now hoping that was the wrong thing to do and the market has continued to find strength. Now we need to use sales to pull our average price up. We need to use our bins and the basis to get all we can. Not only have we been given a gift on the board but the basis has also strengthened dramatically. We have seen very strong basis levels in all markets. Almost all the feedmills in the Southeast have been running really tight on inventory this fall. They expected the corn to fall in their lap with a 3+ billion bushel carryout. We have already seen more rail delays this year than last year and expect that to continue. With corn in the bin, pick places to hedge the corn and wait on the basis to come to you. There should be a lot of good basis opportunities.
We can find a good basis for any corn you need to move to make room for beans or to core the bins. Let us work the basis for you, do not take posted bids right now! For corn that you want to store, scale in sales to hedge it and wait on better basis whether on train delay or just January appreciation. There will be good basis this winter!! Work orders at $3.99 for new crop!!
Soybeans
Soybeans lost supply and increased demand. Corn has lost some supply but there are still a lot of questions about demand. That is one big thing that is keeping corn muted compared to soybeans. That is why new crop 2021 corn is still below $4 when last year the new crop Dec contract was above that level. There are still many questions about how much production has been lost in China and how many stocks they have. There are lots of questions about how much supply has been lost in the US as well. But the unknowns on demand have muted the markets reaction to those shocks. We get USDA Quarterly stocks report at the end of this month and the market expects corn yield to continue to drop.
Everyone needs to continue to scale in sales on old crop corn!! Work orders just below $4 on new 2021 corn!! Basis has remained surprisingly high for harvest locally.
Wheat
Of all the commodities, wheat has the most comfortable stocks world wide. One positive on wheat is some big wheat importing countries have started to stockpile more wheat this year. Wheat has been a follower so far but this week has gotten a life of its own. Dryness concerns in the US and Black Sea region have started to catch the market’s attention. Export values for the Russian crop have been increasing.
Keep scaling in sales for new crop wheat up close to $6!!
Cotton
Cotton had huge export sales this week but fell victim to weakness due to the hurricane not hitting the cotton production areas as hard as feared. Cotton exports have been sluggish lagging the other commodities and this is the first week seeing huge movement recently. The market needs to see more of that before we will see much of a reaction.
