Markets may have put in short-term lows after USDA report

The average trade estimates for the report were negative, and the funds had been aggressive sellers leading up to the release. In the end the report was slightly negative, but close to expectations, which resulted in the grains likely putting in a short term low.

Erin Ehnle Brown / Grand Vale Creative LLC

On Friday Sept 10, the U.S. Department of Agriculture released its September Crop Production report. The average trade estimates for the report were negative, and the funds had been aggressive sellers leading up to the release. In the end the report was slightly negative, but close to expectations, which resulted in the grains likely putting in a short term low. Now, it’s not likely we have established the harvest low as of yet, but maybe the “sell the rumor, buy the fact” type trade can help push the grains back to more attractive selling prices.

As expected, USDA’s report was a nonevent for wheat. Most of the changes for wheat will likely show up in the Sept. 30 Small Grains Summary report. USDA left old crop wheat estimates unchanged, making only minor reallocations between categories.

For the 2021 crop year, USDA decrease imports by 10 million bushels and increased food demand 2 million bushels. That adjustment followed through to end up as a 12 million bushel decrease in ending stocks, which is now estimated at 615 million bushels (as expected). The national average price for wheat dropped 10 cents to $6.60.

On the world stage, old crop wheat stocks are estimated at 292.6 million metric tons, 2.2 million metric tons above expectations and 3.8 million metric tons above the previous month. New crop stocks are estimated at 283.2 million metric tons, 4.6 million metric tons above expectations and 4.1 million metric tons above the previous month. The increase in stocks was due to production increases in Australia, the European Union, and China.

Corn was an interesting market to watch the day of the report. Corn struggled to start the session and sold off hard once the numbers were released due to the knee jerk reaction to what appeared to be bearish numbers. The selling pressure was enough to push corn below $5, which uncovered a large amount of buy orders. The end result was that corn was able to stage a key reversal on the charts (higher high, lower low, and higher close than the previous session) which is a signal of a potential change in the trend. Of course, this formation needs confirmation, which appears to have come on Wednesday. Although the numbers for corn were negative, the heavy selling leading up to the report priced in most of the bearishness allowing corn to bounce higher the day of the report.


For old crop corn, USDA decreased ethanol demand 40 million bushels and cut exports 30 million bushels. That 70 million bushel cut in demand followed through to increase ending stocks by the same, putting stocks at 1.187 billion bushels, 18 million bushels above expectations. The national average price increased 5 cents to $4.45.

For new crop corn, USDA increased planted and harvest acreage by 600,000 acres, putting planted at 93.3 million acres and harvested at 85.1 million acres (389,000 acres above expectations). Yield was also increased 1.7 bushels which resulted in production jumping 246 million bushels to 14.996 billion bushels (95 million bushels above expectations).

Breaking down the increased planted acreage estimate: 500,000 acres were in North Dakota, 300,000 acres were in Missouri, 200,000 acres in Nebraska, and 100,000 acres in South Dakota. Three of those states were in major drought throughout the growing season and the other (Missouri) was flooding most of the growing season.

On the demand side, USDA increased feed demand 75 million bushels and increased exports 75 million bushels. The net result to ending stocks was an increase of 166 million bushels putting stocks at 1.408 billion bushels, 77 million bushels above expectations. The national average price dropped 30 cents to $5.45.

The world numbers for corn were bearish. Brazil’s production was estimated at 86 million metric tons (1.2 million metric tons above expectations) and to everyone’s surprise Argentina’s production was increased 1.5 million metric tons to 50 million metric tons. China’s production as also hiked 3 million metric tons. This put old crop ending stocks at 286.5 million metric tons, 8 million metric tons above expectations and 5.7 million metric tons above last month. New crop stocks were estimated at 297.6 million metric tons, 12.2 million metric tons above expectations and 13.0 million metric tons above last month. The increase was due to higher production estimates for the U.S. as well as from Argentina and China.

For soybeans, USDA’s report was neutral to friendly and mostly as expected. For old crop, crush was cut 15 million bushels which increased ending stocks by 15 million bushels to 175 million bushels.

South America’s production was left unchanged at 137 million metric tons for Brazil and 46 million metric tons for Argentina. World old crop ending stocks increased by 2.3 million metric tons to 95.1 million metric tons (4 million metric tons higher than the trade expected).

For new crop soybeans, yield was increased 0.6 bushels to 50.6 bushels (0.2 bushels above expectations) and harvested acres were decreased by 284,000 acres to 86.436 million (226,000 acres less than expected). That put production at 4.374 billion bushels, 35 million bushels more than last month and 7 million bushels more than the trade expected.


For the new crop balance sheet, beginning stocks were increased 15 million bushels, production was increased 35 million bushels, imports were cut 10 million bushels, crush was cut 25 million bushels and exports were increased 35 million bushels. All of that put ending stocks at 185 million bushels, 30 million bushels more than last month and 7 million bushels more than expected. The new crop national cash price dropped by 80 cents to $12.90. New crop world ending stocks were estimated at 98.9 million metric tons, 2.7 million metric tons more than last month and 2.5 million metric tons more than expected.

The grains put in a strong performance on Friday, Sept. 10, after the report was released with most contracts posting solid gains and cutting the losses for the week in half. But the lack of follow through on Monday, Sept. 13, had a lot of traders worried the grains would continue to take the path of least resistance. Tuesday’s session brought hope back into the markets as strength returned, reviving the idea that maybe the grains will stage a bit of a recovery before general harvest activity starts.

Monday’s performance was influenced by the poor export shipments pace, which continued to show lack of activity in the Gulf. For the second week in a row, corn reported no grain movement out of the Gulf and Pacific Northwest. But soybeans did see some movement. Soybeans were also supported by another export sale as an unknown destination bought 132,000 metric tons of U.S. soybeans.

Once again, the market found support from USDA’s Crop Progress report. The report is starting to get thin with information, but it is still giving some market influencing news. As expected, spring wheat harvest is all but wrapped up, as is durum harvest. Winter wheat seeding is moving forward as 12% is now in the ground versus 8% average. The trade is expecting higher winter wheat acres this year due to the strong base price for crop insurance.

The average trade estimate had corn and soybeans conditions steady to improving 1%. The actual report once again had corn’s rating declining 1% to 58% good/excellent. The decline in corn’s rating was due to the eastern Corn Belt states coming in lower than expected. Soybean’s crop rating was, as expected, unchanged at 57% good/excellent. But that didn’t mean there weren’t some surprises in soybeans numbers. Illinois was hit the hardest, dropping 4%. The only other state to see a decline was South Dakota, which lost 2%.

Pasture conditions also declined last week, dropping 4% to 25% good/excellent. This will likely result in many cattle coming off pastures early and that could result in calves coming to town earlier than expected.

Topsoil moisture levels are starting to disappear as last week saw conditions drop 5% to 51% surplus to adequate. If this trend continues, we will once again go into winter with little moisture reserve. Subsoil moisture conditions also declined, dropping 2% to 49% surplus to adequate.

The grains have seen a pretty good retracement and are now starting to show some technical signals that maybe a recover is in the cards. Producers should be patient and see if this recovery becomes reality. If it does, we could see the grains recover 50% of the recent decline. That would be a good time to start making catch up sales.


“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

What To Read Next
More people are turning to small, local egg producers as a sharp rise in conventionally farmed egg prices impacts the U.S. this winter.
This week on AgweekTV, we hear from Sen. John Hoeven on the farm bill. Minnesota Gov. Tim Walz puts ag in his budget. We reminisce with Mikkel Pates, and we learn about the origins of the skid-steer.
There's something about Red Angus that caught the eye of this Hitterdal, Minnesota, beef producer.
David Karki of SDSU underlined that planting cover crops like rye is not so much about big yield increases, but it will make the land more tolerant of fluctuations in weather.