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The dust has settled, and we now have a little clearer picture for the 2021 crop. Although the nation was in the grips of a major drought, somehow we were able to produce a much better crop than expected. That bit of news hit the grains hard on Tuesday, Oct. 12, and is resulting in the grains testing major support lines.

The flurry of reports on Tuesday started with the Weekly Export Inspections estimate. The estimate was friendly to wheat and corn, as the previous week’s export shipments pace came in within expectations. But the report was bullish soybeans, as last week’s inspections were sharply higher than expected. The other friendly aspect in the weekly inspections report was that more shipments came out of the Gulf.

The crop production report was mixed. The report was bullish wheat as both US and world stocks were reduced more than expected. It was negative corn as both U.S. stocks and world stocks were increased. Corn’s yield and production estimate came in at the second highest on record. For soybeans, the crop production estimate was bearish. USDA not only increased U.S. stocks sharply above expectations but world stocks were also increased. Like corn, soybean’s yield was the second highest on record, but production came in at the highest amount on record. To add to the bearishness, November soybean closed below $12 for the first time since this spring. That opens the door up for a test of the recent contract low of $11.84. Adding to the unfriendliness, when USDA increases the yield for corn and soybeans in the October report, it is usually increased again in the November or December report.

For old crop wheat, USDA increased planted acreage 200,000 acres, increased harvested acreage 100,000 acres, but left yield unchanged. That resulted in an increase in production of 2 million bushels. On the demand side, USDA increased seed demand 3 million bushels but decreased feed demand 2 million bushels. The net change was a 1 million bushel increase in old crop ending stocks, now estimated at 845 million bushels.

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For new crop wheat, USDA decreased harvested acreage 900,000 acres and decreased yield 0.2 bushels. The net change was a 51 million bushel drop in production. Imports dropped 10 million bushels. On the demand side, feed demand declined 25 million bushels. The net result was a 35 million bushel drop in wheat ending stocks, which are now at 580 million bushels, 7 million bushels above expectations. The national average price increased 10 cents to $6.70.

World wheat numbers were friendly as well with world stocks estimated at 277.2 million metric tons, 3.7 million metric tons less than expected and 6 million metric tons lower than last month. This was mainly due to the cut in US production and the 2 million metric ton cut in Canada’s production.

Corn started the second week of October on the plus side with reports of heavy rains in China supporting the market. The rains caused massive flooding and lowered the quality of their corn crop. Mexico also reported that they will need to import a record 19 million metric tons of corn this year. But all that friendly news was not enough to help corn once USDA’s crop production report was released. USDA’s October crop production report for corn was negative as both U.S. and world numbers where higher than expected.

For old crop, as expected, planted acreage was dropped 100,000 acres, harvested acreage was dropped 200,000 acres and yield was trimmed 0.6 bushels, putting production at 14.11 billion bushels, a reduction of 71 million bushels. Imports were also trimmed by 1 million bushels. On the demand side, USDA decreased feed demand 128 million bushels, increased food demand 2 million bushels, decreased ethanol demand 3 million bushels, and increased exports 8 million bushels. The net result was an increase in ending stocks of 49 million bushels to 1.236 billion bushels. The national average price increased 8 cents to $4.53.

For new crop, yield was increased 0.2 bushels to 176.5 bushels (0.6 bushels above expectations) which increased production 23 million bushels to 15.019 billion bushels (54 million bushels above expectations). On the demand side, feed demand dropped 50 million bushels, food demand increased 5 million bushels and exports increased 25 million bushels. That put ending stocks at 1.5 billion bushels, 92 million bushels above last month and 80 million bushels above expectations.

On the world side, Brazil’s production was left unchanged at 118 million metric tons and Argentina’s production was cut 1 million metric tons to 52 million metric tons. World stocks were estimated at 301.7 million metric tons, 3.6 million metric tons above expectations and 4.1 million metric tons above last month.

This week it seemed like all of the news hitting the soybean pit was negative. Brazil’s soybean planting progress is estimated at 10% planted versus 3% last year. To top that off, China reportedly has imported 30% less soybeans in September due to poor crush margins. And the USDA report was bearish enough to push the November soybean contract below the $12 level, which was major support.

For old crop soybeans, USDA, as expected, increased planted acreage 300,000 acres, harvested acreage 300,000 acres, and yield 0.8 bushels. That resulted in an 81 million bushels increase in production, now estimated at 4.22 billion bushels. On the demand side, crush was increased 1 million bushels, exports increased 5 million bushels, but residual decreased 7 million bushels. That resulted in ending stocks increasing 81 million bushels to 256 million bushels. The national average price dropped 10 cents to $10.80.

For new crop, USDA increased yield 0.9 bushels to 51.5 bushels (0.5 bushels above expectations). Production was estimated at 4.448 billion bushels, 74 million bushels more than last month and 43 million bushels more than expected. Imports were also cut by 10 million bushels. On the demand side, crush was increased 10 million bushels and residual increased 1 million bushels. The net result was a 135 million bushel increase in ending stocks, now estimated at 320 million bushels (23 million bushels above expectations). The national average price dropped 55 cents to $12.35.

For South America’s upcoming crop, Brazil’s production was estimated at 144 million metric tons versus 137 million metric tons last year and Argentina’s production was estimated at 51 million metric tons versus 46.2 million metric tons last year. World ending stocks were estimated at 104.6 million metric tons, 5.7 million metric tons more than last month and 4.2 million metric tons more than expected.

U.S. canola yield was estimated at 1,119 pounds (42% lower than last year), harvested acres were 2.105 million (up 18% over last year), and production was estimated at 2.354 billion pounds (down 32% from last year). For sunflowers, yield was estimated at 1,554 pounds (down 13% from last year), harvested acres were at 1.223 million (27% lower than last year), and production was estimated at 1.900 billion pounds (36% lower than last year).

The third and final report of the day was the Crop Progress report. The report was mixed as it showed corn and soybean harvest slightly behind expectations, winter wheat planting as expected, but crop ratings for corn and soybeans better than expected.

The market will focus on weather now— not just the U.S. weather but also South America’s weather. At this point the weather in South America appears to be negative as good rains have been reported in Brazil along with good planting progress. Argentina is a little dry. As for the U.S., rain and snow have been hammering the Northern Plains and western Corn Belt, slowing down harvest. And with more rain midweek, it will make for the last bit of harvest challenging. The central and eastern Corn Belt have also seen harvest delays due to rain, but the six-to-10-day forecast continues to call for above normal temps and below normal precip.

Last week cattle pushed higher, posting solid gains and making a good run at a 50% retracement of their recent setback. But so far this week, cattle’s performance has been disappointing, especially with the grains under heavy pressure. Cash bids continue to remain unchanged at $124. Cattle seem to be under pressure from concerns that inflation is sucking up more of the average consumers discretionary spending cash, which takes away from dining out or from buying the more expensive beef at the grocery store. To add to the pressure, 2021 beef production was increased 90 million pounds in Tuesday’s crop production report, putting production at 27.83 billion pounds, which is an increase of 658 million pounds year over year.

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