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Yesterday’s report was friendly for corn at first glance, however the demand numbers told a much different story than the 20bpa cut in corn yield. The corn market was able take back a nice portion of yesterday’s losses overnight. Soybeans remain under pressure while wheat trades marginally higher. December corn and November soybeans posted downside “key reversals” on the charts yesterday; we’ll need to see some follow-through by early next week at the latest to confirm that a top has been seen. There is still been no relief from recent weather patterns, as even corn in “good” areas suffers due to heat and lack of moisture.
The USDA lowered the national corn yield by 20bpa to 146bpa yesterday. The biggest surprise yesterday, however, may have been the cuts in new crop corn demand projections. The gov’t cut over 1 billion bushels from new crop corn demand, with 650mil/bu coming from feed demand. Export demand projections were down 300mil/bu while demand for ethanol was down only 100mil/bu. Many analysts believe that demand for ethanol could slip much lower if prices were to remain high. As a result of the USDA’s adjustments, their estimate for new crop carryout shrank by 698mil/bu, a number which could have been much more severe if demand cuts were not seen. The new crop corn carryout number was about 100mil/bu below trade expectations. Some traders failed to notice that old crop carryout grew by 52mil/bu due mainly to a cut in exports.
Lesser adjustments were made to the soybean and wheat balance sheets. The national bean yield was lowered to 40.5bpa from 43.9bpa in June. New crop soybean demand was cut by 150mil/bu, with cuts made in crushing and exports. National wheat yield was raised by 0.2bpa to 45.6bpa. Old crop stocks increased slightly while new crop exports were increased by 50mil/bu. In general, the report could be considered slightly friendly for the wheat market.
Export Sales to be released this morning at 7:30am CST, pre-report estimates:
· Wheat 300,000 – 500,000mt
· Corn 200,000 – 500,000mt
· Soybeans 350,000 – 650,000mt
Weekly ethanol production numbers continue to suffer. This week’s output was the lowest since July 2010. We believe that the end of the bull market in corn will ultimately coincide with massive demand loss from the ethanol sector if prices stay relatively high. We look for wide ranges again today. Outside markets are mostly negative for our ag complex today. Crude oil is over $1 lower with the US$ higher and equities lower. Please call with questions.
Standard Grain, Inc.
www.standardgrain.com / email@example.com / (312) 462-4438