USDA surprises trade with yield numbers
The wheat market continued its downside move this week as rainfall in Australia, Russia and the Ukraine had traders in selling mode early week. On Oct. 12, the U.S. Department of Agriculture released its monthly World Agricultural Supply and Demand Estimates report indicating a record world stocks number that was additionally negative for the wheat complex.
U.S. ending stocks for 2017-18 came in at 960 million bushels, above the average trade guess of 946 million bushels and 27 million bushels higher than 933 million bushels from the September report. Planted acreage increased 300,000 to 46 million.
Feed and residual usage was reduced to 120 million as the NASS grain stocks report from Sept. 30 indicated lower than expected June-August disappearance. Projected 2017-18 U.S. corn supplies being the second largest on record expect to reduce wheat feed and residual usage for the rest of 2017-18.
World ending stocks for 2017-18 are estimated at a record 268 million metric tons compared to 263.14 million metric tons in the September report. This was at the high end of pre-report estimates ranging from 258 million to 265.4 million metric tons. Russian wheat production was increased 1 million metric tons to a record 82 million metric tons. European Union production increased 2.2 million metric tons to 151 million metric tons, primarily due to favorable French production. India and Canada also saw increases of 2.38 million metric tons and 500,000 metric tons, respectively. All of these countries increases more than offset the Australian decline of 1 million metric tons to 21.5 million metric tons.
Weekly export sales were bearish, totaling 6.4 million bushels, all for the 2017-18 marketing year. This puts total marketing year sales at 521.2 million bushels, 5 percent below the previous marketing year. Weekly shipments of 12 million bushels put the marketing year total at 356.6 million bushels, 3 percent below the previous year.
For the week ending Oct. 12, December contracts for Minneapolis wheat were down 12.5 cents at $6.1125, down 13 cents at $4.305 for Chicago wheat, and down 10.5 cents at $4.2625 for Kansas City wheat.
The October USDA report was mostly bearish for the corn complex as yields were increased almost two bushels per acre. It is surprising that the USDA thinks this year's crop is only 1.5 percent smaller than last year's bin buster. This compares to USDA estimates of a 5 percent smaller soybean crop this year compared to last year. Last year was a year with few problems across the country with crop development.
Corn prices were positive after the report, as they rallied on the coattails of the soybean rally. There was short covering, as the funds were heavy short corn contracts. This reaction may help provide support as corn made new contract lows of $3.425 as the report became public. The new lows were only a couple cents off the old contract lows and the bounce off the lows was seconds after hitting them. For the week ending Oct. 12, December corn was down 1.25 cents to $3.49. March corn was down 0.75 cents at $3.6275.
The yield came in at 171.8 bushels per acre, 1.9 bushels per acre more than the September USDA estimates of 169.9 bushels per acre. Pre-report estimates ranged from 167 to 171.5. A decrease of 400,000 acres to 83.1 million acres tried to help offset the yield increase. Production increased from 14.28 billion bushels from September estimates of 14.184 billion bushels.
The ending stocks number will continue to be troublesome, but likely is built into this market already. Ending stocks came in close to the pre-report estimates of 2.249 billion bushels. October U.S. ending stocks came in at 2.34 billion bushels versus the USDA September estimates of 2.335 billion bushels. They raised feed use 35 million bushels, which was helpful. World ending stock numbers decreased 1.5 million metric tons to 201 million metric tons (7.91 billion bushels), partly due to increased demand in China.
As of Oct. 10, corn harvest was well behind schedule, but the combines may have picked up some ground this week as it was mostly open harvest weather. Corn harvested is at 22 percent versus the five-year average of 37 percent and 33 percent last year. Corn mature was at 82 percent versus the five-year average of 87 percent and 92 percent last year.
In the week that ended Oct. 3, funds added to their large number of net short corn contracts to around 143,000 contracts, up from the 133,000 net short the week prior.
The weekly export sales report was bullish as they totaled 63.3 million bushels. This puts total marketing year sales at 538.9 million bushels, 36 percent less than the previous marketing year.
The soybean markets received good news on Oct. 12 as a lower yield number and lower stocks drove this market sharply higher. The trade reacted immediately to the bullish stock number and broke through resistance of $9.88 with ease. November soybeans flirted with $10, and we will see if the market can break this resistance. South American weather will be the factor that supports the rally. For the week ending Oct. 12, November 2017 soybeans were up 19.75 cents and January soybeans were up 19.5 cents.
The yield came in 0.4 bushels per acre less than the September estimates of 49.9 bushels per acre. The yield is now at 49.5 bushels per acre versus pre-report average estimates of 50 bushels per acre. Estimates ranged from 48.5 to 52.1. Today was the first time in five years that there was a decline from the September versus October yields. This will start talk of the USDA lowering yields from October to November. An increase of 800,000 acres to 89.5 million acres offset the yield reduction to keep the production number at 4.431 billion bushels.
Ending stocks came in lower than the pre-report estimates of 453 million bushels. October U.S. ending stocks came in at 430 million bushels versus the USDA September estimates of 475 million bushels. World ending stock numbers decreased 1.4 million metric tons to 96.1 million metric tons (3.53 billion bushels).
South American weather is mixed as central Brazil is drying out and needs rains to get their crop started. Argentina planting has been delayed by excess moisture, and planting there should pick up as it is starting to dry out.
Free on board prices at the U.S. Gulf are 21 cents below prices at Brazil's ports.
Soybean harvest was delayed slightly to start off this fall. As of Oct 10, soybeans harvested were at 22 percent nationally versus the five-year average of 26 percent and 24 percent last year. There was a killing frost in the Dakotas and Minnesota this past week, which was a welcomed sight to help kill off the remaining green stems and help dry it down.
Weekly export sales showed a total of 64.2 million bushels for 2017-18. This puts total marketing year totals at 921.5 million bushels, 16 percent less than the previous marketing year.
For the week ending Oct. 12, November canola futures in Winnipeg traded $1 lower at $495.70 Canadian per metric ton. The Canadian dollar traded .0045 higher to .8026. This brings the U.S. price to $18.05 per hundredweight.
• Velva, N.D., $17.58 per hundredweight, December at $17.94.
• Enderlin, N.D., $17.98 per hundredweight, December at $18.45.
• Hallock, Minn., $17.48 per hundredweight, December at $17.94.
• Fargo, N.D., $17.95 per hundredweight, December at $18.15.
Cash feed barley bids in Minneapolis were at $2.10, while malting barley received no quote. Berthold, N.D., bid is $2 and CHS Southwest New Salem, N.D., bids were at $2.50.
Cash bids for milling quality durum are $6.75 in Berthold and at $6.75 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $16.80, December at $16.90. Soybean oil was 57 cents higher at $33.28 on the December contract.