No Fireworks in October Report

October 22, 2016 02:26 AM
soybean harvest2

USDA report says soybean production is up, corn production down slightly

USDA’s Oct. 12 World Agricultural Supply and Demand Estimates (WASDE) report broke the soybean yield barrier once again, raising it to a record high 51.4 bu. per acre. Meanwhile, corn yield estimates slipped a second time since USDA’s August 2016 high of 175.1 bu. per acre, falling to 173.4 bu. per acre.

Overall analysts described the October WASDE report as “neutral,” noting it did not stray far from trade estimates. “There is a lot less activity from this report than I expected. I thought we’d see some fireworks and surprises from the USDA, but that’s really not the case,” says Brian Hoops, president of Midwest Market Solutions.

“USDA didn’t feed the ‘bean supply bear’ by taking U.S. ending stocks above 425 million bushels, so the market is reacting with short-covering on the heels of this report,” says Mike Zuzolo, president of Global Commodity Analytics in Atchison, Kan.

Markets were supported by the corn yield reduction paired with a simultaneous increase in exports. 

“We call this report a quiet one on trade impact,” says Rich Nelson, chief strategist at Allendale in McHenry, Ill. “The trade got production right for the most part.”

He says analysts foresaw the report adding new-crop corn acreage and lowering corn yields. “It’s surprising to see an increase in demand [for corn] offset this,” he says.

Incidentally, Nelson says soybean’s record-breaking yield news was not seen as bearish because some had predicted an even bigger yield bump of 2 bu. or 3 bu.

The most recent WASDE report “had a little for everyone,” says DuWayne Bosse, analyst for Bolt Marketing in Britton, S.D.

“The bearish crowd is going to say that ending stocks just went up, but I was expecting worse than that,” he says. “[The report was] OK for soybeans. I think the market was expecting a higher yield, looking for a rally.”

Instead, Bosse notes 10 minutes after the report, markets settled, showing that traders didn’t view the report as overly bullish.

So what’s the takeaway advice for farmers? One option is for producers to sell soybeans on rallies to $9.75, Bosse says. Farmers should be aware November often brings a customary seasonal price decrease, down to $9.20 or $9.15.

Here are several key numbers from the mid-October WASDE report:

  • Corn yield of 173.4 bu. per acre, slightly lower than the average trade guess, according to Reuters, of 173.5 bu. per acre.
  • Corn production of 15.06 billion bushels, less than the average trade guess of 15.06 billion bushels.
  • Corn ending stocks are 2.32 billion bushels, less than the average trade guess of 2.36 billion bushels.
  • Soybean yield of 51.4 bu. per acre, slightly less than the average trade guess of 51.5 bu. per acre.
  • Soybean production of 4.27 billion bushels, less than the average trade guess of 4.29 billion bushels. 
  • New soybean ending stocks of 395 million bushels, less than the average trade guess of 413 million bushels. 
  • Wheat yield was unchanged at 52.6 bu. per acre and wheat production at 2.31 billion bushels.
  • New wheat ending stocks of 1.14 billion bushels, less than the average trade guess of 1.15 billion bushels. 
  • The WASDE report increased corn use by 25 million bushels to 14.53 billion bushels. Feed and residual remained unchanged at 5.65 billion bushels. Corn exports were raised 50 million bushels for a total of 2.23 billion bushels. 
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