Grain futures markets have made a large bounce in the last three sessions, the result of surprises in the Oct. 11 U.S. Department of Agriculture reports. Traders have been poised for negativity, as private firms have forecast higher record yields and higher crop production for the year.
In fact, USDA Crop Production numbers came in below expectations. The immediate result was for December corn futures to bounce 18 cents off the low over the next three trading days, and November soybeans to bounce 45 cents off the low in the same time.
Prices have eased in early trading on this Tuesday morning, but we still are currently 3.76-3⁄4, down one and a half cents, on the December corn futures after a low Thursday morning at 3.60-1⁄4 before the report.
The November soybean futures are trading 8.85-1⁄4, down six-and-a-quarter cents. The low Thursday morning was at 8.47. USDA now expects a corn crop of 14.776 billion bushels, down from the 14.827 September estimate.
That would come on an estimate of a record 180.7 bpa yield, just off the 181.8 bpa average trade pre-report estimate. Of course, some privates had put out estimates as high as 183.5 bpa. This would result in a 2018-2019 carry-out of 1.813 billion bushels, 39 million more than the estimate from last month, but way less than the 2.002 billion carry-out of this last year.
USDA’s soybean estimates are not so rosy. They come up with the same crop size as last month, at 4.69 billion bushels. That comes on a 53.1 bpa record yield, up slightly from the 52.8 bpa estimate from the September report, and slightly less than the trade expectation.
The yield is significantly higher than last year’s 49.3. Sadly, the big negative is the expected end of year carry-out, which would increase from 438 million bushels last year to 885 at the end of this year. Obviously, the bounce represented the trade reacting to the crop size and not the carry-out.
Give USDA credit in this report for methodology that should give us the best accuracy. In this report are the results of hundreds of plots actually being harvested and weighed. Now comes the “fade” for this report. Will the crop now get smaller?
The smaller argument is starting to be made by those frustrated by rain-delayed harvest and by reports of potential crop losses, especially in soybeans. Talk across the Western Corn Belt is all about no harvest for the last week to 10 days, and about damage to the soybeans in the fields.
A shift in weather is being predicted. The ten to 15-day forecast is for open harvest weather. It remains to be seen if the harvest can be finished without further damage and losses.
Talk in the trade this week is about Delta beans, normally taken to river terminals, that are being rejected for damage over six or eight percent, or are taking huge discounts.
The culprit is the slow movement out of the Gulf because of the trade disputes with China. As a result, the terminals are not seeing large runs of beans to allow them to blend out the damage.
Farther north, some beans in the upper Midwest are turning black in the fields. In some cases, doctors are suggesting respirators for combine operators because of mold spores in the air.
Officially, the corn harvest is ahead of normal pace, but don’t tell that to farmers in Iowa and Minnesota. Iowa is just 17 percent harvested, and only gained two percent last week.
No one I have talked to knows where the two percent came from. The five-year harvest average is 24 percent. Minnesota went from 15 percent to 18 percent this week, but 20 percent is the average.
Ohio farmers are at 31 percent, three percent ahead of average. The U.S. is at 39 percent, against a 35-percent average.
The soybeans are the concern for most. Ohio has 43 percent of the crop off, with a 53 percent average. The U.S. is at 38 percent, but 53 is the average.
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