Traders Consider New Data
Oct 13, 2017
Good Morning! From Allendale, Inc. with the early morning commentary for October 13, 2017.
Grain market traders consider their next move after the latest round of data hit the market from the USDA. Outside markets have their second day in a row of important economic data with Retail Sales leading the way.
La Nina is looking more and more likely in the coming months. How is this impacting the agriculture markets? What should we expect going forward? We'll discuss this and so much more with CME Group's Erik Norland, October 24th at 8:00 PM CDT. Register here to join us or to have the recording sent to you.
New crop corn stocks were increased to 2.340 billion on yesterday's Supply and Demand report. That was over the trade guess of 2.289 billion. Acreage was lowered by 457,000 acres today to 90.429 million. New crop yields were raised from 169.9 to 171.8 bpa, a bit more than the 170.1 trade guess. Production was therefore raised by 132 million bushels to 14.280 billion.
Soybean stocks (new crop) were lowered from 475 million to 430, below the 447 trade expectation. Plantings were raised by 694,000 acres to now 90.207 million but in a surprise to traders, yields were dropped from 49.9 to 49.5 bpa. Higher acreage but lower yields left production unchanged at 4.431 billion.
Wheat stocks were raised from 933 million bushels to 960, above the trade guess of 946. USDA’s 9/29 Small Grains Summary report implied a 2 million bushel increase to production, now at 1.741 billion. The 9/29 Grain Stocks report, showing physical stocks as of September 1, implied weak demand from June through August. That resulted today in a 30 million bushel drop for feed/residual.
Export sales will be released this morning at 7:30 AM CDT, one day late due to Monday's Columbus Day holiday. Analysts are anticipating corn sales of 300,000 to 500,000 tonnes, soybeans 900,000 to 1,200,000, and wheat sales of 300,000 to 500,000 tonnes.
Ethanol production fell from 1.010 million barrels per day in the previous week to now 967,000 per day. It is not too surprising to see that sharp drop. It happened last year as well as the market waits for new crop corn to refill the supply chain. This new number was 0.5% over last year. That helps bring the year to date pace down from 3.4% over last year to 2.8% over last year. USDA’s whole-year goal in corn for ethanol is a 0.7% increase year over year.
China's Agriculture Ministry lowered its estimate of Chinese corn production down from 212.48 million tonnes to 210.10. Consumption was also raised from 214.57 to 215.62. Their fall 2017 soybean harvest estimate was raised from 14.68 million tonnes last month to 14.94.
Replanting may be required in parts of Brazil which have already been planted. Drew Lerner of World Weather, Inc. notes, "parts of that region that received significant rain earlier this month and have already planted will need rain soon to prevent seedlings from withering and dying. If rain does not increase soon some of those crops may need to be replanted."
Managed money funds were estimated buyers in all but wheat though report-trade yesterday. They bought 12,000 corn contracts, 22,000 soybeans, 9,000 soymeal, and 2,000 soyoil. They were thought to be sellers of 3,000 wheat.
Economic reports out today include Retail Sales, CPI, and Core CPI at 7:30 AM CDT. Michigan Sentiment, and Business Inventories are due at 9:00 AM.
Yesterday's hog weight numbers in the Actual Slaughter report showed no change in the average dressed weight at 211 lbs per head but a 1 lb decrease in the average barrow/gilt weight. That would be seen as slightly supportive.
Recent beef production is only 3.7% over last year. To make USDA's new numbers work (from yesterday's S/D report) the next 2 1/2 months will need to see beef production >7.4% higher than last year.
Dressed beef values were lower with choice down 1.08 and select down 1.26. The CME Feeder Index is 155.22. Pork cutout value is down .04.
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