WASDE just 'less bearish'
Corn production and supplies in the U.S. and around the world are higher than earlier estimates, USDA officials say in Friday's World Agricultural Supply and Demand Estimates (WASDE) report.
"Corn production is forecast 146 million bushels higher at a record 13,989 million bushels. A 1.9-million-acre reduction in harvested area is more than offset by a 5.1-bushel-per-acre increase in the forecast yield. At 160.4 bushels per acre, the national average yield remains 4.3 bushels per acre below the record in 2009/10," according to Friday's WASDE report. "Despite a late-planted crop and July and August dryness across much of the Corn Belt, cooler-than-normal summer temperatures and an extended growing season have supported higher-than-expected yields for most producers. Higher yields are forecast this month across the Plains, Corn Belt, and South."
"Ear count was down slightly, offset by ear weight, which showed a slight gain," adds Peter Meyer, agricultural commodities director for PIRA Energy Group. "This makes sense as the cool weather during ear fill was THE difference this year and trumped the late-season dryness."
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"The big numbers so far are the ending stocks estimates. Not a big shock for beans; a bullish number was expected although it might be somewhat less than ideas. Corn very much a bullish report," says Jack Scoville, senior market analyst with The PRICE Futures Group in Chicago. "Production a little less than expected although still big, and increases in demand on or above expectations. Corn ending stocks bullish to expectations for sure."
Soybean production is seen slightly higher from the September estimate; that crop's now seen at 3.258 billion bushels, 109 million higher than the Fed's last estimate two months ago, with the October report cancelled on account of the government shutdown.
"Harvested area is reduced 0.7 million acres to 75.7 million. The soybean yield is projected at 43.0 bushels per acre, up 1.8 bushels. Soybean supplies for 2013/14 are projected 4% above the September estimate on both increased production and beginning stocks," according to Friday's report. "U.S. soybean exports for 2013/14 are raised 80 million bushels to 1.45 billion reflecting increased supplies and the record pace of sales through late October. Soybean crush is raised 30 million bushels to 1.685 billion mostly due to increased soybean meal exports. Soybean ending stocks are projected at 170 million bushels, up 20 million from the September forecast."
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The data in Friday's WASDE report yields a price range for corn futures 30 cents lower than the last WASDE report. Now corn is seen ranging from $4.10 to $4.90/bushel. For soybeans, USDA officials expect a price range of $11.15 to $13.15 per bushel.
The market had already been trading a 160-bushel corn crop size, says Jason Roose of U.S. Commodities in West Des Moines, Iowa. What it hadn't been trading, however, was demand. And Friday's report shows there's more demand out there than that on which the trade had been focused.
"I think what we saw is that for the last four months, we'd been trading a supply-bear market. As of today, we saw contract lows. We've been trading a 160-bushel yield already and a 43-bushel yield on beans," Roose says. "The market has been continuing to watch. And marketing managers watching that 2-billion-bushel carryout . . . once that's confirmed under a 2-billion-bushel carryout, I think now we finally saw that possibly our demand is stronger than expected."
Adds Sal Gilbertie, Teucrium Trading LLC senior grain analyst: "Lower prices already seem to have been built into the global grain markets; this report confirms trader expectations. If the past is any indication, stable or lower prices from here may boost demand for all grains moving forward."
So, what's that mean moving forward? Friday's data hasn't exactly turned a bear market into a bull market just yet, but it's taken some of the sting out of the bears' bite, Roose says. That's because an already tight demand table for soybeans is seen in the same light, while the same is now true -- at least more true than it has been thought in the last few weeks -- for corn.
"We still have a supply-bear market. With a carryout under 2 billion bushels, maybe we don't go as low as earlier anticipated. This is not really a bull market, just less bearish," Roose says. "We just saw very much liquidating market with the funds heavily short, and maybe this gives them a chance to take their gains and watch the weather in South America very closely."
Looking even further out, can Friday's numbers help clarify anything on the 2014 acreage front? Though corn's lately been approaching its breakeven point, Friday's USDA jolt could be enough to turn things just far enough into the black for corn to edge ahead of soybeans in the battle for potential acres in 2014, Roose says.
"I think the producer is definitely watching and hitting the calculators right now pretty hard whether they're planting corn or beans, especially if we see just a little bit of a rally on the corn market and come out of contract lows. For this marketing year, corn is still probably more profitable. Weather is still the driving force in the markets," he says. "I think even with this big drop in the corn market and liquidating soybean market, we haven't seen any weather. That's why the producer hasn't gotten bearish."