Corn and soybeans are slightly higher Thursday morning. Cattle are higher with hogs mixed.
Mike Minor of Professional Ag Marketing says the pop in corn and soybeans early Thursday is mostly technical as both bounced off key support areas.
However, the market is still positioning ahead of the September WASDE and digesting weekly export data.
Could Corn Yield Go Up in the WASDE?
Average trade guesses for corn have yields dropping around 3 bu. per acre, but if USDA repeats its track record the yield could actually go up.
Minor says, “I was actually surprised that the top end of the estimates only came in .5 bu. higher on yield.”
Minor says last August-September was one of the driest periods in 40 years and yet USDA raised yield .5 bu. in September.
He says with the methodology used by USDA it still looks at satellite imagery, farmer surveys and finally some field data which may include ear counts.
That may not adequately reflect the dry weather in the East or the heavy disease pressure in some areas of the Corn Belt.
That would likely show up in test weights, which USDA doesn’t measure and won’t be known until those bushels cross the scale.
Could Soybeans Yields be Unchanged or Higher?
Average trade guesses on soybean yields show a cut of less than 1 bu. per are.
However, last year USDA left soybean yields unchanged in the September report despite the late season flash drought and didn’t adjust yields lower until October through the final January report.
Minor says USDA could take the same approach this year despite dryness and late season disease.
What Does USDA do With Demand?
If USDA does lower yield on corn or soybeans the next question is what do they do with demand?
Minor says corn demand is overstated and soybean demand may not be low enough if China does not return to the U.S. soybean export market soon.
Is China Buying U.S. Soybeans?
China has not bought any new crop soybeans to date but in the weekly export report they did show up for 67,500 metric tons of soybeans that were shipped, but it was old crop business.
So, Minor isn’t getting too excited about the news.
Currently, reports indicate China is mostly booked for October and about 15% booked for November, mostly Brazil origin.
He says China may buy late which would cut their purchases and as a result soybean prices would need to fall below $10.
Nearby Lean Hogs Make Contract Highs
Nearby lean hog futures are higher and making contract highs.
Minor says this has been mostly technical buying as the funds have extended their long position and support is also coming from spread activity.
He says while cutout prices are impressive at nearly $115, hog weights are starting to rise and will soon weigh on cash and cutout values.
Weekly exports were disappointing Thursday at only 17,300 MT, but China bought 8,200 MT.
Can Cattle Continue to Recover?
Cattle futures are sharply higher again on Thursday morning still in recovery mode.
Minor thinks the market may be signaling a top, especially as cash trade in the North was lower last week and again this week there hasd been light business at the $238 level, down $5 from last week.
However, he still thinks the correction was healthy and if cash recovers the futures could as well.
