Corn and wheat ended lower Tuesday with sharply higher soybeans. Cattle soared, with hogs mostly lower.
Corn Market Impressively Handles Yield Shock
Brian Splitt with AgMarket.Net says new crop corn fell to contract lows after the August WASDE in reaction to USDA’s eye-popping 188.8 bushel per acre corn yield.
That was nearly 4.5 bushels higher than the trade estimate and is also up 7.8 bushels from July and 9.5 bushels from 2024.
The double whammy was an increase in corn harvested acres by 1.9 million, based on FSA and NASS data, which pushed production to a record 16.7 billion bushels.
However, Splitt says considering that was a 1 billion bushel increase from last month, he thought the market absorbed the bearish news quite well, closing only 13 cents lower.
“If we kind of use last year as a reference point, December corn made a low at $3.85. And and the carryout number that we got on the August report a year ago was 2.037 billion bushels. So when you take into account all of the extra yield we got on this report, the extra acres, and so that was a jump on, you know, 4.6 % from trend on corn yield, and now our carryouts only 80 million bushels higher than it was on the August report a year ago,” he says.
Is August the Biggest Corn Yield of the Season?
The August report does not include field surveys, so there is speculation that the yield could be artificially high and the largest of the season.
Splitt says that is what happened last year as satellite imagery and farmer surveys may not have been able to detect pollination or disease problems that could trim yield.
“So if you take the USDA’s high yield estimate last year, and then where they ended up on a final basis, and take that percentage drop and take that off of today’s yield number, it actually takes you right back to 184, which is where a lot of the trade really thought we would be today. So I still think there’s a very good possibility. Maybe today wasn’t the high yield, but I think with the way that some of the weather looks like in the Eastern Corn Belt, the way that we’re pushing crop along with high overnight temperatures, stuff that you just won’t see on the satellite imagery, I do think there’s a very good shot that come January, much like last year. We’re lower than where we are right now,” he explains.
USDA Raises Demand to Offset Production.
Despite that USDA raised ending stocks nearly 450 million bushels pushing over 2.1 billion bushels, but it would have been worse is USDA had not raised usage to a record 16 billion bushels.
Splitt says demand has been strong and so USDA’s projections are justified.
“There’s really not a reason at this point to say our exports are too high on the USDA balance sheet. Our export book right now for new crop is tremendous. So the signal right there is, no, it’s running fine.”
Soybean Yield Also a Record
USDA also estimated soybean yield at a record 53.6 bushels, up 1.1 bushels from July and nearly 3 bushels over last year.
However, with harvested acres lowered by 2.4 million, USDA lowered production 43 million bushels to 4.3 billion.
How Bullish is the Sub-300 Million Bushel Soybean Carryout?
With lower carry-in USDA lowered new crop ending stocks 20 million to 290 million bushels.
Splitt says that’s already bullish but with warmer, drier weather the last half of the month that could cut yield and even a bushel cut would further cut into the carryout.
How High Could Soybeans Rally?
A sub-300 million carryout doesn’t suggest $10 soybeans but the market has already rallied 45-cents the last two days and is quickly running into chart resistance according to Splitt.
“So, if we made a move to the low end of the range in July and we start to go back to the upper end of the range in August and the September, that might take you back up into that $10.70, $10.80 area. That’s the area, if you’re patient, I’d be trying to shoot for.” he explains.
The key to moving above that resistance and to $11 may be tied to when China comes back into the market to buy U.S. soybeans.
Wheat Balance Sheets See Little Change
Wheat production was nearly unchanged at 1.927 billion bushels but with higher exports carryout was lowered 21 million to 869 million bushels.
Wheat ended lower but more on spillover from the weakness in the corn market.
Cattle Futures Soar to Retest Highs?
Cattle futures soared on Tuesday as funds stepped in to buy. Feeders reacted to the plunge in corn prices while live cattle rallied with a $9 jump in Choice boxed beef.
Splitt says its entirely possible the cattle market could negate the bearish reversals from Friday and make new all-time and contract highs because that has been the pattern.
“So, I think this market’s probably in store for a new high, probably just by a hair. And then maybe we see another wave
of profit -taking. I think this is behavior that we want to be aware of, where if we start to see new highs by a buck or two and then another big wave of, you know, $6 lower on futures, that might kind of give us an idea that the funds are starting to get in an atmosphere where they want to take profit,” he says.
However, higher cash and the futures steep discount to the futures will also attract buying interest on the breaks.
