Another month, another bearish surprise from USDA which pushed corn prices into fresh lows. On the week, corn was off 5, beans were unchanged and wheat bucked the bearish backlash adding 6 cents.
Thursday’s USDA crop report found record-high corn yields of 175.4, shocking analysts who expected about a 172.4 bushel yield. This amounted to an extra 300 MB of supply from last month’s report, but USDA cushioned the blow by penciling in an extra 75 MB for both exports and fed use, thereby increasing carryout to 2,487 MB. You have to go back to 2006 when carryout levels were at 17% of total use, which is where we find ourselves today. For soybeans, yield was kept the same, which also was a blow to analysts who had been leaning towards a cut in soy yield. On the wheat side, exports were bumped up by 25 MB thanks to a recent surge in HRW business. Protein continues to be the main driver for wheat right now, with spring wheat prices starting to fund buying interest in recent weeks.
On the international front, early season estimates out of South America are starting to take shape. Brazil’s gov’t trimmed the country’s corn estimates, seeing a range of 91.6-93.1 MMT, which is roughly 0.5 less than their October estimates and off from 97.8 last year. On soy, they pegged it in the range of 106.8-108.6 MMT, lower than 114 last year but on par with USDA’s latest forecast of 108. The Rosario Grain Exchange ticked up their Argentine corn estimates to 41.5 from 41 prior. The Buenos Aires exchange estimated farmers there advanced planting 1% wk/wk to 35%.
On the US export front, sales were strong this week for corn and wheat but lackluster for beans. Wheat export sales were a marketing year high and beat expectations sharply. Corn sales were also up sharply from last week, with Mexico accounting for nearly half of the sales. Soybean sales were down 39 percent from last week and missed analyst expectations. Soybean exports year-to-date stand at 14.7 MMT vs 16.0 this time last year, while outstanding sales stand at 16.772 MMT and a 21.1 MMT mark last year. The current pace of soybean sales is trailing last year’s pace by a good margin but the USDA has export increasing by 76 MB over last year which is troubling and could lead to demand reductions in the balance sheet at some point.
National Cash Market:
Soybeans continued to move higher on basis this week as harvest wraps up and fresh supplies are becoming limited. For the week, US average soybean basis climbed 3-cents while corn basis inched up 1-cent as harvest deliveries were still strong in the Western Cornbelt.
Beans found strength this week driven in part by the Gulf export market which shot up 7 cents a bushel which helped an even bigger move at upstream river terminals which garnered an 11-cent advance. There was however some disruptions in barge traffic on the lower Ohio near Paducah, KY as heavy rains and a rock dike stymied movement. Elevators here took a defensive stance on basis giving up 6 cents on the week. Crush plants followed suit with the broader market moving up 7 cents on average but gains of 10 to 15 cents were fairly widespread at some key facilities.
For corn the market was more subdued as harvest continues to be in full force in the Upper Midwest. Nonetheless river terminals as a group still managed a 3-cent advance on average. However, ethanol plants showed an even smaller gain by bidding up basis only 1.5 cents on average.
Basis levels should continue to climb as harvest wraps up in the coming days for beans and likely wraps up enough in corn to slow pipeline supplies. With futures heading south, the number of farmers selling should be more limited once we get done with the harvest season.
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