Analyst: Halfway Through Harvest, Waiting for the Market to Bottom Out
Corn and soybean harvest has basically reached the halfway mark, and yields are still stellar for both grains. There are no new surprises now in yields as soybean yields are shattering old records, while corn is also outstanding in the northern Corn Belt. New USDA estimates in the October report still show record-large corn and soybean yields, and that means another stellar crop is being harvested right now.
The USDA report did exactly as traders expected for corn (-1 bu/acre to 173.4 bu) and soybean yields (+0.8 bu/acre to 51.4 bu). As far as ending stocks, corn turned out smaller than traders expected by 42 mb at 2.320 billion bushels, with soybeans also smaller than expected by 20 mb (at 395 mb). Wheat ending stocks were 13 mb smaller than traders expected (at 1.138 billion bushels), so all three grains were actually a little friendly on the ending stocks figures vs. traders’ expectations.
As the USDA has done in the past, they hiked soybean production 68 mb, but raised demand 40 mb in exports so that ending stocks were only hiked a total of 30 mb despite another large hike in production. Basically, does China just buy whatever the U.S. produces? The reaction to the report was initially bullish, but then the market sold off into the close so we got a bearish reaction to a somewhat bullish report. The problem is that stocks of wheat, corn, and soybeans are large following a record-shattering yield in all three crops. However, since the report, that market has gained all those losses back plus some more, so the market has turned a bit higher since the initial negative reaction.
Weather forecasts for the next seven days remain warm and dry for the entire period, which is a good harvest forecast. The eight- to 14-day forecast adds a little more precipitation, with cooler temperatures as we ease into fall. This is still a pretty good forecast for harvest, especially for the next seven days.
Yesterday’s Crop Progress Report showed the U.S. corn harvest at 46% complete vs. 49% normally, and soybean harvest at 62% complete vs. 63% normally, so we remain just a bit behind normal progress. Corn conditions rose 1% to 74% G/E, with the final yield model of the year rising .6 bu/acre to 176.1 bu/acre. Soybean conditions also rose a bit, with 1% moving from good to excellent (still at 74% G/E). The soybean yield model also rose 0.27 bu/acre to 49 bu/acre, but so much is harvested now that the only thing that matters is harvest yields, and they are better than expected almost across the nation. Already, the USDA is at 51.4 bu/acre in soybeans (and still rising).
Cotton is now 30% harvested vs. 27% normally, with sorghum 57% harvested vs. 49% normally, so harvest is going well for other crops as well. Sunflowers are 31% harvested vs. 25% normally, and sugar beets are 63% harvested, equal to average. Winter wheat is 72% planted vs. 73% normally, with 47% emerged vs. 45% normally. With the mostly dry conditions last week, pasture ratings dropped from 49% rated G/E to 46%.
No change in recommendations: We continue to target the $9 November soybeans to remove some hedges. In corn, target removing hedges at $2.90 December futures. As we have stated before, it looks like we will have a record-large wheat, corn, and soybean crop in 2016 (as the USDA is currently projecting). That means prices will be poor (as they are) while we bottom the market, likely during harvest. Typically, the lows come from October through January, and this year may be no different. Usually, bottoms last months while tops last minutes, so it might be a while before prices start a significant move higher.
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