Well, that most certainly caught most everyone leaning the wrong way. As I commented yesterday morning, the trade was looking for neutral to positive changes in the USDA grain numbers and neutral to negative in beans, and we received just the opposite. Without question, the biggest negative shock was in corn yields which were raised nearly 3-bpa from last month setting a new national record at 181.3. After a boost of 125 million in overall usage, the end result was an increase in ending stocks of just 90 million bushels or 5%, but the psychological damage was already done. Soybean yields were also boosted but this was somewhat tempered by a 35 million bushels reduction in the carry-in stocks and after the projected usage was increased 12 million, ending stocks came through at 845 million, which all you can say was not a bad as it might have been. Surprisingly enough, bean turned higher on the news, and anytime you see a market react positively to negative information, it is most likely telling you a story.
In the grander scheme of things, do keep in mind that there is really nothing bearish in the corn or wheat figures nor is there anything bullish in the soy. Looking at global corn ending stocks, even with what is potentially the second largest production figure on record for the United States, world ending stocks will still be reduced 19% from last year and will mark the second year in a row of declining numbers. The stocks/usage number will be down for the 3rd
year in a row and remains as the lowest level seen since the 1995/96 crop year. World corn inventories are sitting on a powder keg. While at face value, global wheat inventories would appear to create little cause for concern at 261.29 MMT, but keep in perspective that 52% of these or 136.12 MMT reside in China and I do not believe they are entertaining the notion of stepping into the wheat export business anytime soon. As I said though, the beans are another story, regardless if we rallied yesterday or not.
At 845 million bushels, domestic ending stocks are setting a new record in every category. The largest previously occurred in 2006/07 at 574 million, which also set a record stocks/usage ratio of 19%. The projected stocks usage ratio for this year is now 20%. We have a similar situation globally as the endings stock are now pegged at 108.26 MMT or 30.67% stocks/usage. The previous record was set two years ago with a raw ending stocks figure of 96.68 MMT (10.7% less) and stocks to usage of 29.4%. These are enormous numbers no matter how you slice and dice them. Then, add in the prospect of increased acreage in Brazil for this coming year and reduced overall demand in China and it is difficult to see extended upside potential in the bean market for now. The good thing is, the numbers are now part of the historical record and theoretically have been kneaded into the price dough.
That leads us back to the immediate, and today that means export sales and harvest. There were a few nice sales released in the daily system. 142,876 MT of corn to Costa Rica, 108,010 MT or beans to Mexico and 120,000 beans to Unknown destinations, but unfortunately, there was little to stir the hearts of bulls in the weekly numbers but, there was a holiday in the mix. For the week ending September 6thwe sold 774,200 MT or 30.48 million bushels of corn. On the top of the list of buyers were Mexico with 218.4k MT followed by Colombia at 166.6k and then Japan with 128.3k. Soybeans sales tallied 693,500 MT or 25.49 million bushels. The top sales went to Egypt with 196.3k MT, Japan at 87k and then Iran with 76.2k. Wheat sales did improve a smidge over the previous week coming through at 387,600 MT or 14.24 million bushels. Taiwan was the top buyer at 112.5k MT followed by Mexico with 37k and then Nigeria with 31.4k.
Once again, we have returned to the starting gate, and it may take a bit to get everyone to return to the starting blocks. As I have commented previously, we have entered the period when we often find seasonal lows so I would not expect any of these markets to hold significant downside potential but that said, for now, we lack a reason to rally as well.