USDA Report - 9/12/17

11:01 AM

Market moving news: A surprise in the monthly WASDE report today as both corn and soybean yield estimates were increase month-over-month with most in the trade looking for those much-awaited decreases that many in the industry think we'll have. Corn yield came in 0.4 bushels higher than last month, soybeans up half a bushel.

Increases to both corn and soybean yields and production for the 2017 crop have the trade on its heels this morning. Pre-report the estimates were for corn to work lower towards a 166-167 national average after last month's "still high" 169.5 estimate and for soybeans to lose potentially a half bushel or so. Corn yield estimates came in a t 169.9 which saw an increase to total production of 31 million bushels with most analysts looking for an average decrease of 150 mbu to the production number. Old corn export demand was increased 70 mbu but a decrease to FSI usage saw only a 20 mbu reduction to carry-in.

The total corn supply of 16.585 bbu looks like we'll still be talking about a 2.3 bbu carryout for another few months at least with the 2017/18 crop as further decreases to this coming year's demand were also noted by the USDA. Again, further ethanol/FSI demand cutbacks and little hope for increasing exports due to large SAm crop saw a 62 mbu increase to ending stocks, some 200 mbu higher than average pre-report estimates.

The half bushel per acre increase to soybean yields was enough to push soybean production up another 50 mbu. This was partially offset by an increase to old crop exports and demand, and coupled with another 25 mbu increase to new crop export demand, left the 2017/18 carryout unchanged at 475 mbu. We're seeing a bit of bearish downside to the bean market this morning based on the trade leaning towards a smaller demand number for US soy exports coupled with the bigger yield number. Most estimates pre-report were looking for a 40 mbu reduction in the carryout, most of that attributed to smaller production.

Looking further down the list of worldwide production numbers doesn't paint a bullish picture, either. World coarse grain production and stocks are seen increasing over last month's estimates by 90 mbu. World corn stocks are estimated to be some 202.5 MMT, or nearly 8 billion bushels. World soybean stocks are estimated to be 97.5 MMT, or 3.5 billion bushels.

While we approach harvest and the bulls will come out and vehemently oppose reports from the USDA on actual crop size, we still have to trade the gospel of the land and right now that's telling us that there is more corn and soybeans out there than we want to admit. Illinois corn yield is estimated at 189 bushels, up one from last month, and soybean yield was left unchanged at 58 bushels. Using the third-highest ear weights and the fifth-highest population, it's not a stretch to see how the USDA's logic is penciling in a nearly 170 bushel national average. The concern would be if we lose more demand as corn exports are down nearly 20% year-over-year and ethanol likely has some room to work lower with decreased margins and plants cutting back production levels. Soybean demand continues to increase, and as long as developing countries continue to see an increase in purchasing power, we can see soy-based products continue to be profitable for producers.

AG

Disclaimer: This commentary does not represent the views of Tremont Cooperative Grain Company, but rather one author's opinions. Data used in this commentary is taken from sources believed to be accurate, and is intended for informational purposes only and should not be solely used to conduct any type of trading strategy. For more information, please contact Tremont Cooperative Grain Company at 309-925-4981, or email info@tremont.coop.