Bullish grain stocks report bounces market

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A combine harvesting corn.

Grain markets live for surprises, and that’s what we got out of the U.S. Department of Agriculture grain stocks report Sept. 30.

The USDA significantly reduced their estimates of corn and soybeans stocks at the end of the marketing year, Aug. 31. Although some analysts had predicted that the corn stocks, particularly, were too high, the average trade guesses were in line with the 2.253 billion bushels in the September supply and demand report.

The guesses averaged 2.225 billion bushels. In fact, USDA now says the number is 1.995 billion bushels, a huge difference. At the same time, 575 million bushels of soybeans that USDA used in the September supply and demand report is now reported to be 523 million bushels.

Predictable results

The results on the markets were predictable. December corn futures gained 141⁄2 cents the day of the report, closing at $3.79. Follow-through the next day gave us a high of $3.85-1⁄2. The firming has been held in the market, with early trading Oct. 6 at $3.81-3⁄4. This trading represents a seven-month high.

Soybeans traded a similar pattern, except that futures did not make new highs. The November futures high was actually made Sept. 18, at $10.463⁄4. The market then retreated to $9.85-3⁄4 before the report, but gained 301⁄2 cents the day of the report, to $10.231⁄2. Follow-through gave us a recent high of $10.34-3⁄4, 12 cents off the high.

Chicago wheat futures also expressed a reaction to a surprise reduction in stocks. USDA lowered final acres and yield. December futures gained 281⁄2 cents to close at $5.78, and put in a $5.87 high. The December wheat was hanging in there, with a $5.861⁄2 high Oct. 6, and a current trade of $5.853⁄4. Worldwide production of wheat is on the rise, so this is a selling opportunity.

Next report

The market braces for another chance at a surprise as the latest USDA supply and demand report will be out at noon our time Oct. 9. Going into the report, we are seeing average guesses of yields slightly lower on corn and soybeans.

The USDA currently has the corn yield at 178.5, but traders are expecting 177.7 bpa. USDA has the soybean yield at 51.9, but the trade expects 51.6. These are not significant drops, although reports from individual farmers have yields off more than that.

There is always a mix of great, good and poorer-than-expected yield talk, so it will be interesting to see what the USDA reports, and if the market agrees with it, or is forced to make price adjustments. At this point, the government is always assumed to be right.

Corn and bean markets were firmer Oct. 6 on the USDA harvest progress numbers reported in the Oct. 5 crop progress report. Traders expected corn harvest for the nation to be at 26%, but it was modestly lower, at 25%. This was a 10% gain in a week, and actually ahead of the 24% average.

Ohio is behind

Ohio reported, as of Oct. 4, to be at 9%, significantly behind the 14% average. We gained 5% for the week. Ohio’s soybean harvest also lags the normal 27%. We have cut 21% of the beans, up 8% for the week. Meanwhile, the nation is at 38% harvested, 10% ahead of the five-year average. We gained a whopping 18% in the last week.

Weather reports would suggest that harvest progress will be huge in the coming week, which will pressure prices. Locally, we have been getting scattered light showers that have limited soybean harvest, although much of the early bean fields have been planted to wheat between the rains. Locally, corn is drying down nicely but is not ready for harvest.

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