September USDA Report

USDA report was about as good as we could expect. USDA did not make any major revisions. Overall the numbers are a bit negative. They did not adjust acreage down and did not lower yield very much but only slightly lowered corn demand and raised soybean demand leaving final estimates very close to expectations but on the bearish side. The market did not expect a major yield revision as the crop is still very late and they do not have robust harvest data yet.

USDA used 82 mln corn harvested acres in the Aug crop report. Since then, the FSA data has shown acres reported as cover crops has more than doubled to 4.7 million, but yet the USDA left their harvested acres estimate unchanged on the Sept report at 82 mln acres. When will they adjust harvested acres? RJO reported that two weeks ago NASS said “revising harvested acres significantly using cover crop acres is unlikely until silage survey is completed for the Jan 2020 final crop report.” With so much more of USDA’s own data available since August, it seems a disservice at best to not even entertain updating the acreage.

Beans were up before the report and they are holding their gains after the data was released. As beans are controlled by day length not just temp, they will not benefit as much as corn to the unseasonal warm temps extending the growing season. Beans were also pushed by rumors of China looking to buy US soybeans and confirmation of big exports reported this week. Rhetoric between the US and China seems to be improving, but I feel like we have already been fooled too many times by rhetoric. We are going to need some additional confirmation soon for the market to stay interested. South America is starting off too dry, but it is too early to matter. However, it is still worth paying attention to. If we were to have any weather issue in South America it would quickly change the balance sheet. It is almost mind boggling how well prices have held on with almost zero Chinese demand this crop year. We were able to trim the balance sheet by more than anyone thought possible in just one year. The balance sheet has used up most of its buffer now, one more hiccup will really change the market.

A move higher on a bearish report is a very positive for the market, but we need to keep feeding bullish news. We need to be selling beans above $9 and think hard about scaling in corn sales above $3.75! 

Cotton has finally moved back above $0.60 for the first time in months. USDA was not bullish and the board was up strong before the data was released, so it looks like cotton shorts got spooked by the improving rhetoric with China on trade.