USDA delivered a bearish surprise to the corn market Friday with its yield forecast in the October Crop Production and World Agricultural Supply and Demand Estimates (WASDE) Report, raising national corn yield when traders expected a decrease.
Corn Yield Jumps Unexpectedly
USDA raised the national corn yield from September by 2.7 bushels per acre to 181.2 bushels — a shock when the trade was looking for a 0.7-bushel cut. That increased production by 234 million bushels to more than 16 billion bushels.
“Everybody kind of went through the motions with the USDA, thinking that with the yield reduction we saw last month, we were going to still reside around that 178-ish type of number,” said Brian Splitt of AgMarket.Net. “With all of the rain that was in Iowa and some of the early harvest reports we’re hearing for corn, the thought was that we would maybe see yield come down a touch more.”
Carryout Stocks Rise Sharply
USDA increased carry-in stock on corn by 173 million bushels as expected but did raise demand.
“This number definitely was about as bearish as you could get for yield,” Splitt said. “Now, we knew the beginning stocks were going to increase and they did accordingly — the 173 million bushels.”
The only bright spot came from demand increases. Feed residual rose 50 million bushels, exports increased 25 million bushels, and food, seed and industrial use climbed 50 million bushels. Total demand increased by 125 million bushels.
That increased carryout by 282 million bushels to 1.849 billion bushels and raised the stocks-to-use ratio back above 10%, which tanked the corn market.
“We very briefly had stocks-to-use below 10% at 9.7% last month. And now we’re back to 11.3%,” Splitt said. “So that 10% number really is a key stocks-to-use percentage that separates the possibility of a bigger picture, long-term bull market. We’ve definitely seen the wind taken out of the sails for that conversation today.”
World corn ending stocks also rose by 8.3 million metric tons, adding to the bearish tone.
Soybeans See Modest Yield Increase
Soybeans also saw a 0.3-bushel-per-acre increase in yield to 53.1 bushels. That raised production by 27 million bushels to a record 4.566 billion bushels with ample rains in much of the Corn Belt.
“The concern is going to be if yield went up today, and we just saw what the USDA did with corn, what do they do with bean yield in November?” Splitt said.
He said early harvest results have been strong in the central and eastern regions, offsetting quality issues in the West. Still, soybean ending stocks were only up 5 million bushels.
“Overall, we had a production increase of 17 million and we had a demand increase of 12. So only 5 million bushels get added to the new crop balance sheet for soybeans,” Splitt said. “That’s a pretty big victory, I think, all things considered.”
Wheat Stocks Also Rise
USDA raised wheat ending stocks 23 million bushels to 740 million bushels. World wheat ending stocks shrank slightly to 276 million metric tons.
