USDA Raises Soybean Yield Estimate
DES MOINES, Iowa -- The U.S. soybean crop size keeps getting bigger, according to the USDA/WASDE Reports Wednesday.
While the market reacted positively, immediately following the release of the report, all markets closed the session lower.
At the close, the Dec. corn futures settled 8 1/2¢ lower at $3.37 while March futures ended 8 1/2¢ lower at $3.46 3/4 per bushel.
Nov. soybean futures closed 8 3/4¢ lower at $9.45 1/2, while Jan. soybean futures closed 8 1/4¢ lower at $9.53 1/2.
Dec. wheat futures settled 10 1/2¢ lower at $3.96 3/4.
Dec. soymeal futures closed $3.80 short ton lower at $296.50. Dec. soyoil futures ended $0.01 lower at 33.34¢ per pound.
In the outside markets, the Brent crude oil market is $0.52 per barrel lower, the U.S. dollar is higher, and the Dow Jones Industrials are 45 points higher.
Al Kluis, Kluis Commodities, says the market’s immediate reaction to the report is surprising.
“Nothing real shocking or to support this higher move in the soybean market. Let’s see how the market closes today.”
Dustin Johnson, EHedger LLC grain analyst, says that the USDA’s yields were mainly as expected.
“The USDA has corn demand up another 50 million bushels from an increase in exports. This means it now predicts this year’s total demand will be 777 million bushels above the previous record. This will be a difficult task for the market to achieve with ultra-large grain stocks around the word and large increases expected out of South America,” Johnson says.
In its October Supply/Demand and Crop Production Reports, the USDA juiced its U.S. 2016 soybean yield to 51.4 bushels per acre, over its September estimate of 50.6 bushels per acre.
The USDA’s soybean production estimate is now 4.269 billion bushels vs. its 4.201 billion bushels from last month. If realized, that would be a record-large crop.
For corn, the USDA pegged the U.S. 2016 yield at 173.4 bushels per acre vs. its September estimate of 174.4 bushels per acre.
The USDA’s corn crop estimate is now 2.32 billion bushels vs. the September estimate of 15.093 billion.
More Trade Reaction
Jason Roose, U.S. Commodities, says that the WASDE numbers were neutral-to-friendly.
“Exports were increased on both corn and soybeans, yield estimates even though historically high were not increased as much as the trade had anticipated on the corn and soybeans. Overall, the numbers were no surprise and should continue in same trading range as harvest progresses,” Roose says.
Peter Meyer, PIRA Energy grain analyst, describes today’s report as remarkably pedestrian.
“A couple go items of note; total wheat/corn/soybean exports at 5.225 billion bushels will be a logistical challenge for U.S. ports in my estimation. And, a global soybean carryout of 77.36M MT was up 5M MT month-over-month and is now back at 2015-16 levels,” Meyer says.
Meyer adds, “Corn needs to trade above $3.50 per bushel in order to gain some traction, which this report has not provided. Also, soybeans may get a bump from lower-than-expected yields, but that global carry out is worrisome.”
Michael Rusch, sales director-ag/commercial at Stewart-Peterson, says that the WASDE numbers appear to be market-neutral.
“For what it’s worth, I hold the belief that anyone in the industry can take this report data and make a case for a move in either direction, based on their bias,” Rusch says. “Our stance is to identify if the current data is outside the normal view and what that does to ending stock calculations and if that has a substantial impact on price adjustment. In this case, it doesn’t have much of an impact currently.”
Rusch adds, “What we want to focus on is whether this report will help establish December corn and November bean futures contracts low or validate the existing low. Then we can look at the probability of the average bounce from established low to the March or July high. This will help us set some cash sale triggers and then develop option strategies to prepare to position for the what-if scenarios.”