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USDA Shocks the Market

After big USDA crop numbers, we now await if the demand can be shipped.

The USDA shocked the market today as it raised the demand more than expected while offsetting the increase in demand by raising the new-crop yield to an all-time high of 48.9 b/a.

Old-crop soybean stocks were lowered from 350 million bushels to 255. USDA also increased crush by 10 million. This is an aggressive export revision, as even though we have sold the bushels, we still need to ship them out to count for this marketing year. To meet the export goal, it will require the second-largest August shipment pace ever. It certainly is possible but will require some work to be achieved. We are skeptical about the crush increase as it would require us to beat last year’s July and August production, even though we currently have a lower crush margin than last year.

The old-crop demand picture will be much clearer by the September revisions four weeks from now. As for the new-crop revisions, the USDA raised its demand ideas but offset the increase in demand by raising the national yield to an all-time high. After the revisions, ending stocks were raised from 290 million to 330 million bushels, 10 million higher than the trade anticipated. The USDA revised yields up to 48.9, a new record. Production was increased by 180 million over July. It is 131 million over last year, which would also be a new record. The 180 million increase in production was partially offset with a 15 million increase in crush and 30 million increase for exports and a drop of 95 million in carry in. Stocks to usage, the measurement of supply that prices respond to, will come to 8.2% using USDA’s numbers. That is the biggest since 2006/07.

There were no significant changes made to the world old-crop numbers. Stocks were raised from 72.2 million tonnes to 73.0. New-crop stocks were sharply increased from 67.1 to now 71.2. No changes were made to the previous 2017 harvest estimates for Brazil and Argentina. The USDA’s new-crop price estimate for central Illinois, weighted according to marketing patterns from September 1 – August 31, was lowered from $9.50 to now $9.10. The new-crop bid yesterday was $9.61. We look for beans to continue to chop in a sideways range as the market tries to decide if today’s record yield is attainable as the next few weeks’ weather patterns will have a big impact on overall yields.

The trade will watch the next few weeks’ weekly inspection numbers to see if we are going to get the record sales shipped out.  We would look for sellers to show up in the $10.00 to $10.20 levels as this is an area of technical resistance. I also look for producers to choose to move $10.00+ beans (if that opportunity presents itself) and store $3.35 corn as they try to maximize on-farm storage capacity.

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