Grains closed mostly lower on Tuesday:
Dec Corn – 10 ½ cents/bu (5.22 ½ )
Nov Soybeans – 30 cents/bu (11.98 ¼ )
Dec Chi Wheat + 2 ¼ cents/bu (7.34)
Cdn $ +0.00110 (80.24 cents)
WTI Crude Oil +0.12/barrel (80.64)
Corn and soybean values were drilled lower today, following the release of the USDA October Crop Report. The market had been trending lower prior to the Crop Report, but the numbers contained within it accelerated the downward slide. The USA production numbers and accompanying Supply and Demand tables were bearish, but not a huge surprise. What was surprising was the jump in worldwide projected carryout stocks of corn and soybeans. Wheat numbers, both global and American, were friendly, but early post report release wheat gains saw a sell off as row crops weakened. Highlights of the Crop Report are listed below:
USDA raised its corn crop estimate 23 million bu. from last month, whereas traders expected a 23-million-bu. decline. USDA raised the national average yield by 0.2 bu. to 176.5 bu. per acre, which would be just 0.1 bu. below the record in 2017. It left harvested acres unchanged at 85.085 million acres.
USDA noted the second highest ear count in the 10 objective yield states and estimates record corn yields in California, Idaho, Illinois, Indiana, Kentucky, Michigan, New York, North Carolina, Ohio, Oklahoma, Pennsylvania and South Carolina.
Corn yields are estimated higher than last month in Iowa (up 3 bu. to 201 bu.), Kansas (up 2 bu. to 140 bu.), Minnesota (up 4 bu. to 178 bu.) and Nebraska (up 2 bu. to 190 bu.). USDA left yields unchanged in South Dakota (133 bu.) and Wisconsin (172 bu.). USDA cut yields in Illinois (down 4 bu. to 210 bu.), Indiana (down 3 bu. to 194 bu.), Michigan (down 3 bu. to 171 bu.), Missouri (down 5 bu. to 164 bu.), North Dakota (down 1 bu. to 107 bu.) and Ohio (down 2 bu. to 188 bu.).
USDA raised its soybean crop estimate 74 million bu. from last month to a record level, which was 33 million bu. more than traders expected. It increased the national average soybean yield by 0.9 bu. to 51.5 bu. per acre, which would be the second highest on record behind 51.9 bu. in 2016. USDA left its harvested acreage estimate unchanged at 86.436 million acres.
USDA estimates record yields in Georgia, Illinois, Indiana, Iowa, Kentucky, Maryland, Mississippi, Nebraska, New York, Ohio, Pennsylvania and Virginia.
Soybean yields are estimated higher than last month in Iowa (up 2 bu. to 61 bu.), Kansas (up 2 bu. to 42 bu.), Minnesota (up 2 bu. to 49 bu.), Nebraska (up 2 bu. to 61 bu.), North Dakota (up 1 bu. to 26 bu.), South Dakota (up 2 bu. to 40 bu.) and Wisconsin (up 5 bu. to 54 bu.). USDA left yields unchanged in Arkansas (50 bu.), Illinois (64 bu.), Indiana (60 bu.), Michigan (50 bu.) and Ohio (58 bu.). USDA cut yields in Missouri (down 1 bu. to 50 bu.).
As indicated above, it was really the global Supply and Demand numbers that pushed the corn and soybean markets sharply lower on Tuesday. The world demand for corn saw an overall drop of 5 million tonnes, despite Chinese demand increasing by 2 million tonnes. After factoring in a small global corn production increase of 0.5 million tonnes, global corn stocks are 4 million tonnes higher, hence the 10 cent drop in corn futures. Similarly, with soybeans, the USDA raised global carryout by 5.6 million tonnes through a 2.5 million tonnes reduction in demand (China demand was lowered by 1 million tonnes), as well as increases in USA stocks and USA production increases.
Wheat was the one bright light in the USDA Crop Report today as the USDA cut it’s 2021/22 production estimate by 51 million bushels (hard red winter down 28 million bu, soft red winter down 5 millino bu, white wheat down 13 million bushels, and durum wheat up 2 million bushels). Wheat imports were cut by 10 million bushels, while domestic feeding was cut by 25 million bushels. The net result was a USA carryout of 580 million bushels, which is the tightest wheat carryout since 2007/08. The weakness in corn and beans ultimately hurt wheat prices today, as did Egypt tendering for wheat and then abruptly cancelling the tender, due to “high prices”.
Our Wanstead and Alvinston locations received new crop corn deliveries today! Overall quality was good, with very good test weights, miniscule vomitoxin measurements, and moisture levels running between 24 and 27 per cent.
The USDA Weekly Crop Condition Report saw corn harvest pegged at 41% complete and soybean harvest pegged at 49% complete, both in line with trade expectations. Corn and soybean good/excellent condition ratings rose 1% respectively, versus the trade expectation of unchanged. Given the government increases to corn and soybean average yields, a 1% increase in good/excellent should likely be market neutral tomorrow. Prices should see two sided trade overnight, with a slight bias higher to start the day tomorrow, as USA numbers today were not as surprising as the market downturn suggested.
On the day, funds were believed to have sold 10,000 corn futures (now long 231,000), sold 20,000 soybean futures (now long only 15,000), while buying an estimated 2,000 Chicago wheat futures (now short 3,000).