While USDA adjusted acreage and production for corn and soybeans as the market expected, the numbers for U.S. wheat stocks tightened, supporting wheat prices after Friday's USDA reports.
“They didn’t change things too much,” said Jerry Gulke, president of the Gulke Group in Chicago and a farmer in Illinois, speaking with Farm Journal Radio’s Pam Fretwell. “It was a lot of hype and much ado about nothing, perhaps.”
Incorporating the Farm Service Agency's data on acreage, which was released last month, was the main adjustment in this report, said Alan Brugler, president of Brugler Marketing and Management.
"The FSA acreage is the main influence here," Brugler said. "They did about what we expected. They cut the corn acreage by 400,000,”
USDA, though, raised their estimate of the U.S. corn yield to 168.0 bu./acre, up 0.5 bu./acre from the September report, which Brugler noted as surprising move that went against USDA’s downward revision on corn yield in the September report.
“A lot of times when you cut harvested acres, you raise the average yield on what’s left,” Brugler said of USDA’s upward revision on yield. “You just assume that what you’re getting was the worst stuff.”
In the Oct. 9 Crop Production report, USDA estimated that farmers will produce 13.6 billion bushels of corn on 80.7 million acres, with an average yield of 168 bu. per acre.
For soybeans, USDA forecasts farmers will produce 3.89 billion bushels on 82.4 million acres – down 1.1 million from last month’s estimate – with an average yield of 47.2 bu. per acre as USDA raised their soybean yield estimate by 0.1 bu./acre.
“We shrank the consumption because of the exports, so we ended up getting the ending stocks that we were looking for, which was 425 million," Brugler said.
U.S. soybean exports shrank by 50 million bushels, he pointed out, as USDA raised the Brazilian soybean crop by 3 million metric tons to 100 million.
In terms of the market's reaction to Friday's reports, it was a bit of a shrug. "In a nutshell, I would call the report slightly negative for corn and beans. The reaction is almost non-perceivable," said Brian Doherty, senior market adviser for the Stewart-Peterson Group. "The demand for beans is really good, but the yield numbers seem fairly impressive. For corn, I’d say it’s a 50-50 split on what people expected on yield."
World Wheat Stocks Reach New Record
For wheat, the market shrugged off the higher global wheat stocks numbers, with Doherty highlighting the dryness in the Southern Hemisphere.
"The one market that has some life is wheat, which is up a few cents, which is not a lot, but that’s considering projected world carryout is up," he said. "It think the focus is on the beginnings of what could be dryness in Australia, the Black Sea Region. The Southern Hemisphere has drier conditions that might be directly correlated to the El Nino effect. And so the market tried to go lower, seemed to run out of selling interest and the buyers are right back on board, at least shortly after the report. I think these markets are going to factor in more outside influence."
World ending stocks were raised to a new record high of 228.49 million metric tons, up from USDA’s September estimate of 226.56 million, aided by increases with exporters like the European Union and Australia.
The increase in foreign stocks coincided with a reduction in U.S. wheat exports and a smaller U.S. crop figure, Brugler pointed out, with total wheat shipments for the marketing year falling 50 million bushels to 850 million bushels. The estimate on 2015-16 wheat production was lowered to 2.052 billion bushels, down 84 million bushels.
The shock in wheat, said Brugler, was the increase in Australian production.
“The one that surprised me was they raised the Australian wheat crop,” Brugler said, pointing out that talk in the marketplace was that USDA would lower Australia’s crop estimate due to El Nino damage in the eastern part of the country.”
USDA now pegs the Australian crop at 27 million metric tons, up 1 million tons from the prior month’s estimate. USDA attributed the increase in Australian wheat production to sufficient sub-soil moisture that helped the crop survive dry conditions in September.