Friday’s USDA report did not have a lot of news, but what it had caught the market leaning the wrong way. The result, eventually, was a changed landscape for the market the last few days.
USDA released the Supply and Demand Report Friday morning, and the result was a resounding “thud” in the soybean markets. The market focused on the raise in estimated yield of the soybean crop. That was bumped up 1.5 bpa to 36.3 bpa, which was more than expected.
The result on the market was larger than might have been expected, but the increase was not what was expected. The change in yield added 111 million bushels to the crop size, but USDA says that 20 of that will be crushed and 80 will be exported.
So, ending stocks were only raised by 10 million bushels to 140 million. Yet, on the news, beans dropped almost 45 cents.
Follow through Monday was another 46 cents before the markets posted small gains Tuesday morning early. By 10 a.m., January beans were up 3 1/2 cents to 14.08.
Why the reaction?
The report was in the wrong direction, after prices had been pushed higher in late summer as we anticipated a very tight carryout. Increasing a little to the carry spooked the market. That triggered sell stops and pushed prices lower.
The market is in the process of proving that the fear is over and we know the crop size and it is in the bins.
The corn markets fought off the big drop, even though the corn yield was also raised. In the case of corn, it was only 0.3 bpa higher, adding slightly to the carry, which is now estimated at 647 million bushels.
Remember that the market thinks that a comfortable carry starts at a billion bushels. Seven dollars is still a high price for corn, reflecting this carry. Monday was a different day for corn.
It began to follow beans lower, after being higher for most of the morning. Once the dam was broken December futures dropped almost 21 cents, to a low of 7.13.
As recently as Friday, the high was 7.54. In early October it was 7.76. Corn prices have slipped lower as the reality of better-than-expected yields have been the norm even in poor-yield areas.
Yields of 235 bpa are being talked about in northeast Ohio, with many farmers sheepishly admitting to an easy 200.
Harvest progress has been better than I expected the last week. After the 9 inches of rain some of us got out of the Sandy storm and associated weather patterns, I thought it might be two weeks before we saw combines running again.
In fact, some muddy going was reported a week ago, and the last few days I have seen combines running without leaving much of a mark. We are not parking semis in the end of the field anymore, but we are getting done.
Many farmers say they are on the last day or so of harvest. Some northern Ashtabula County farmers are finally running beans they had been worried about. Now is the time of wondering if the bins will hold it all, even with new bins built on many farms. (It was a good year for John Wallbrown at DFS!)
As I mentioned last week, it is a better year for the farmers than the elevators. Harvest basis was gone long before harvest was.
The last half of the corn crop does not need much drying. And, there is an inverse in the futures markets beyond March which portend lower prices this summer than now. That remains to be seen. So, the dry spring and summer led to a wet, delayed fall.
The flush of wheat planting that was expected was done late or not at all. We will be shy wheat acres for the second year, although acres were nearly nonexistent last year.
Prices remain a disappointment to those who hesitated at the high. They remain historically high,, especially for the high yields we are being blessed with locally.