Yields continue better than expected
Yields of corn and soybean harvest continue better than expected, and that will pressure grains even more than the USDA stocks and small grains report yesterday.
USDA's report yesterday indicated higher stocks of corn (+143 mb over expectations at 841 mb) and soybeans (+17 mb at 141 mb). But wheat stocks were 58 mb smaller as we fed the wheat instead of the corn last quarter. However, the wheat production number was larger than expected at 2.128 mb (+20 mb from expectations) as HRS wheat production was hiked 20 mb in spite of lower planted acreage. (Note that yields were hiked to record large at 46.8 bu/acre - a hike of over 10% from the August report or last revision, the same as the Sept. sorghum hike! Is a 10% hike also in the cards for corn/soybeans? Note too that it's also likely that Canada HRS yields also need to be hiked).
As we hinted in yesterday's opening comments, USDA raised 2012 soybean production by increasing harvested acreage and increasing yield 0.2 bu/acre to 39.8 bu/acre. Net, the report indicated more stocks of nearly everything than traders had thought - and we aren't even talking about the much better 2013 corn and soybean crop yet!
What is even more concerning for bulls has to be the larger-than-expected corn and soybean yields in this year's crop, which have the potential to hike ending stocks much more than the stocks report yesterday! Crop conditions released yesterday afternoon are an example, as soybean conditions improved a whopping 3% to 53% G/E, with the Pro Ag yield model hiked 0.58 bu/acre to 43.73 bu/acre, now slightly above trend yields, and now we have an above-average corn and soybean crop in 2013! Also, the hike in yield of 0.58 bu/acre is about 42 mb extra production - over two times the increase in stocks that the report indicated yesterday. That means prices can drop much more from current levels, especially if the harvest yields continue to come in well above expections.
The hike in soybean conditions indicates that yields are shocking farmers on the high side, and reports of better-than-average yields are accurate across the Corn Belt. Corn conditions were steady at 55% G/E, with the yield model dropping slightly to 161.6 bu/acre. It is likely that USDA will need to hike both corn and soybean yields in the next October report, as it's becoming quite obvious that the lowered production numbers from August in corn/beans and September in soybeans were ill advised.
Crop development is also slowly advancing, with corn now 96% dented vs. 97% average, and 63% mature vs. 70% average. Wisconsin is the only state below 90% dented at only 84%, so that state is in need of more time to mature the corn crop. Corn harvest is 12% complete vs. 23% average, so that will advance quickly in the next few weeks as we are on the cusp of more general harvest. Soybeans are 67% dropping leaves vs. 74% average, and 11% harvested vs. 20% average. Winter wheat is 39% planted (1% behind average) and 12% emerged (vs. 15% average). Pasture conditions improved 2% to 36% G/E with rains in September.