USDA RECAP

USDA October Crop report was slightly bearish with corn/soybean futures pushing lower following the release of the report. Nov Beans fell to their support at $12, bounced but did close the day at 11.98, down 30 on the day. December corn fell with soybeans and closed the day down 9 at 5.24.

High points of the report:

• Corn yield is forecast at 176.5bpa compared to 176.3 last month. Noteworthy, the all-time record yield was 176.6 in 2017. Ending stocks are up slightly from last month at 1.5 billon bu.
• Soybean yield is 51.5, up .9 bushel from last month. For context, the record is 52.1 set in 2016. Carryout is 320 million compared to the average guess of 300 and up from 185 million from just last month after accounting for the large September 1 stocks report.
• NASS did not adjust US corn and soybean acres from their September forecast leaving corn harvest acres at 85.1 million acres and soybeans at 86.4 million acres.
• NASS raised IA and MN corn yields to 201 and 178bpa, while lowering IL, OH, and IN to 210, 194, and 188bpa respectively. 
• There can be some adjustment in the US corn and soybean yields into the final report, but the market’s focus will shift to demand and South America crop prospects.

Some additional notes from Richard Feltes, Head of Market Insights at RJO Brien:

Key uncertainties going forward:

• Will US farmer limit additional soy sales in wake of price plunge and prospects for additional price erosion as US yields continue to exceed expectations?
• Will US soy crushers, benefiting from fat margins, push basis levels higher to secure more inventory?
• Will under-bought foreign wheat buyers, facing higher prices/dwindling stocks, step up pace of wheat purchases before prices advance fall/winter? Will PRC, under-bought on soybeans, step up buying pace on board weakness following today’s crop report?
• Will PRC coal shortage and associated rolling blackouts trigger a reduction in PRC soybean use?
• Will White House reverse anti-carbon policies to stem crude oil rally that is providing underlying support to corn, soy oil, inflation and winter heating costs?
• Will managed fund CN/BN longs, facing increased odds of further gains in 21/22 US CN/BN production on Nov and Jan crop reports, continue carrying longs into swelling estimates of 9/22 US carryovers?

Bottom line—pre-crop report chatter that under-bought domestic CN/BN users would be anxious buyers of a bearish Oct crop report. Trade will be monitoring their interest in extending coverage into yearend or whether they elect to maintain hand to mouth coverage in hopes of even lower prices in coming weeks. Our 9/22 US CN/BN carryover forecasts, if realized, suggest that both markets need to seek lower prices to spur demand. We see no reason to bottom pick row crop futures until both markets unable to erode further on bearish news.