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The corn yields in better soils are surprisingly good, analyst says

Today’s USDA report was a very bearish report for soybeans, analyst says.

USDA weighed in with our October report today, raising both corn and soybeans yields, ending stocks, and lowering the price.  

It was a positive report, though, for wheat. So, it now appears we’ll have plentiful corn/soy stocks for the coming year. Yet, wheat becomes considerably tighter. 

Soybeans saw the largest changes in the October report, going from 185 million bushels (mb) ending stocks projected in September to 320 mb ending stocks in October – essentially twice as large! It’s not often we see a nearly 100% increase in projected ending stocks in one month, but we did today in soybeans. That makes soybeans not even remotely tight in ending stocks anymore – quite a change in numbers. Most of the increase came from a 0.9 bu/acre (bpa) increase in soybean yields to 51.5 bpa, and the rest came from the hike in stocks from 2020 crop production made in the Sept. 30 report.  So overall, this was a very bearish report for soybeans.  

Corn ending stocks weren’t nearly as big a change, but with soy stocks more plentiful, corn won’t have to compete much with soybeans for acres in 2022. Corn yields were hiked a much more modest 0.2 bpa to 176.5 bu, with ending stocks up to 1.5 billion bu (from 1.408 in Sept. and vs. traders expectations of 1.421). So the report was bearish corn, but not nearly as bearish as soybeans.  

Wheat was a completely different animal, with ending stocks cut 35 mb to 580 mb, the lowest since 2007/08 (when prices were very explosive).

World wheat ending stocks were also tightened to 288.4 mmt vs. 292.6 September. In contrast to corn and soybeans where the report was bearish, the wheat numbers were all on the bullish side.  

Weather forecasts are turning drier, with below-normal precipitation forecast the next week for all but North Dakota, South Dakota, and Wyoming. There is snow in Montana, Wyoming, Colorado, and Arizona today and will move eastward, but likely warm to rain. Temps remain above normal for the entire two-week period, and there will be almost no rain in the eight- to 14-day forecast anywhere in the Corn Belt.  

Essentially, this forecast means harvest might be nearly over in October this year.  

Pro Ag was expecting no bullish news in the October USDA report, because our yield models are little changed from September. However, actual harvest yields have been surprisingly good in most Corn Belt locations, with both corn and soybean yields better than expected in many areas, including the dry northwest Corn Belt. Rains arriving as late as August 20 revived yield potential in the northwestern Corn Belt. The best land fared the best (as always), with subsoil helping crops to persist until the rains arrived. Poor soils fared much worse, with the lightest soils having pretty much zero production of corn or soybeans due to drought.  

But the yields in better soils are surprisingly good. The same can be said for many Corn Belt locations. That propelled USDA to hike yields aggressively for soybeans and modestly for corn in the report. The largest production hikes were for Iowa, Minnesota, and Nebraska, which is the northwest Corn Belt – the areas expected to be hardest hit by drought. But as we stated earlier, the late rains revived yield potential in many areas (especially the better soils), and crop yields once the lie detectors (aka combines) hit the fields. The bushels in the combine hoppers were larger than expected very often this fall, and that resulted in higher yield projections by USDA.

That takes the edge off the markets now, especially corn and soybeans, since the extra stocks will make things much more comfortable going forward.  

With recent rains replenishing soil moisture deficits in northwestern Corn Belt areas, prospects are much better for next year, too.

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Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.  See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com. 

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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