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3 Big Things Today, August 11

USDA drops supply bomb on grain markets.


1. The USDA’s August Supply/Demand Report was bearish for the grain markets, with heavy losses Thursday. Today, investors are buying with the idea that the markets were oversold.

In the overnight markets, the December corn futures contract traded ¾¢ higher at $3.71 per bushel. The November soybean futures are 1½¢ higher at $9.41. The September wheat futures are 1¢ lower at $4.39.

Cory Bratland, Al Kluis Commodities broker, says that after the shocker from the USDA yesterday, U.S. grain prices are mixed this morning.

“As the market continues to digest the negative crop report from yesterday, there is a lack of new news to trade on, so rallies will be limited,” Bratland stated to customers in a daily note.

In its August Supply/Demand Report Thursday, the USDA pegged the 2017 U.S. corn yield at 169.5 bushels per acre vs. the USDA’s July estimate of 170.7 and the average trade estimate of 166.2 bushels per acre.

For soybeans, the USDA’s U.S. yield is estimated at 49.4 bushels per acre vs. the trendline forecast of 48.0 and the average trade estimate of 47.5 bushels per acre.

2. August crop-weather for the Midwest is expected to remain dry through August.

For soybeans, the plants rely on this month’s moisture to fill out the pods, creating bigger yields. For corn, the crop needs moisture to put grain weight on ears, assisting in gaining bigger yields at harvest.

Already, states like Iowa have over half of their area in either a drought or severe drought.

Meanwhile, a government forecaster is not seeing any active El Niño or La Niña weather patterns for the 2017-18 winter. Yet, the chances of normal weather are expected to drop from July to February, according to a monthly forecast released Thursday by the the National Weather Service’s Climate Prediction Center.

This report compares to last month, when the forecaster noted neutral conditions for the Northern Hemisphere into the 2017-18 winter season.

3. After the USDA Thursday pegged bigger U.S. corn and soybean carryover stocks for the 2017-18 marketing year, investors are keenly aware that global demand is going to be very important going forward.

On Thursday, the USDA Weekly Export Sales Report showed stronger wheat sales, with corn and soybeans within trade expectations.

Here are the sales:

  •     Wheat = 464,300 metric tons vs. the trade’s expectations of between 200,000 and 400,000 mt.
  •     Corn = 680,400 mt. vs.  the trade’s expectations of between 400,000 and 800,000 mt.
  •     Soybeans = 684,300 mt. the trade’s expectations of between 350,000 and 950,000 mt.
  •     Soybean meal =  142,500 mt. vs. the trade’s expectations of between 50,000 and 200,000 mt.

Meanwhile, the U.S. weekly ethanol production is on the rise. In its weekly report Wednesday, the Energy Information Agency stated that production averaged 1.012 million barrels per day (b/d)—or 42.50 million gallons daily.

That is up 10,000 b/d from the week before. The four-week average for ethanol production edged higher to 1.013 million b/d for an annualized rate of 15.53 billion gallons, according to the Renewable Fuels Association.

Stocks of ethanol were 21.3 million barrels. That is a 1.9% increase from last week.

There were zero imports recorded for the week.

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