Grains closed higher on Friday, with livestock lower.
Corn Rallies on USDA Yield Cuts
Chip Nellinger with Blue Reef Agri-Marketing says corn rallied on Friday in reaction to the September WASDE and USDA’s USDA’s 2.1 bu. per acre yield cut to 186.7 bu.
The overall report was still bearish as the agency raised corn production by 72 million bu. to a record 16.814 billion bu. due to another increase in harvested acres, this time by 1.3 million to 90 million acres.
Still with lower yields USDA acknowledged there are problems with the crop due to disease and a dry finish, which will likely mean lower yields in future reports says Nellinger.
Illinois and Iowa Yields Too High
The number one and two corn producing states are still above 200 bu. on yields with Illinois and Iowa both at 219 bu. per acre.
While USDA lowered yield for both states, he says they are still too high in Illinois based on the yield results he’s hearing from his clients.
Lower Corn Harvest Results Add Fuel to the Fire
Nellinger says the market is continuing to see disappointing early harvest results with substantially lower yields than last year.
He says where farmers did not use fungicide and had heavy pressure from Southern rust and other diseases the loss can be up to 100 bu.
Those harvest reports are not likely to get better as the harvest progresses since the later corn was also limited by one of the driest Augusts in 130 years.
USDA Pegs Corn Demand at a Record
USDA raised corn usage and demand to a record 16.1 billion bu. as they hiked exports 100 million bu. to a record 2.975 billion bu.
However, Nellinger thinks this may be overstated and if USDA lowers corn yield in future reports they could also come down subsequently on demand.
That will make it difficult to get ending stocks below the 2.117 billion bu. estimate USDA released on Friday.
December Corn Closes Above $4.25
December corn finally closed above $4.25 resistance, which may open the door up for additional buying especially as Nellinger thinks the funds are exiting their short positions.
How far the rally can extend may be dependent on if the funds go long in the corn market and if that can offset the anticipated farmer selling on the rally.
Could Soybeans See Additional Yield Cuts?
USDA lowered yield just .1 bu. per acre at 53.5 bu. on soybeans but Nellinger thinks that number could come down by 2 to 3 bu. by the final report.
He says the disease pressure and the extremely dry finish to the season will hurt soybean production, especially as farmers get into some of the later planted varieties.
How Far Will Yield Need to Fall Without a China Deal?
Even if USDA cuts soybean yields in future reports it may not be enough to offset the loss of China export business if the U.S. doesn’t get a trade deal.
China has booked their needs for September and October and so the earliest they could be in the market if the U.S. reached an agreement is November.
Soybeans Rally on China Trade Hopes
Soybeans were higher on Friday though with news progress being made on China trade talks and more scheduled meetings next week.
The administration says they are paving the way for a meeting between President’s Trump and Xi in late October.
However, that may not be soon enough to stop the loss of at least part of the normal Chinese soybean export business.
Wheat Rallies on Cut in Ending Stocks
Wheat futures rallied with corn and soybeans and with a cut in U.S. ending stocks by 25 million bu. to 844 million.
However, global stocks were increased by 4 MMT which will make it difficult for wheat to extend the rally according to Nellinger.
Is the Party Over in Cattle??
Live and feeder cattle futures ended lower on Friday and for a second week.
Cash trade also developed at lower money in the South at $240 live, down $2 from last week.
Nellinger thinks the top may be in for now as funds liquidate and take some profits.
However, he is not ruling out a return to record highs later.
