MINNEAPOLIS — There was skeptical optimism in the days leading up to the Oct. 12 crop production and supply/demand reports in the shadow of new bullish, year-end quarterly corn and soybean stocks numbers.
However, the optimism was subdued when the U.S. Department of Agriculture rained on the market parade Oct. 10, coming in with lower numbers but not meeting pre-report expectations.
As a snowstorm descends on the northern Great Plains where planting was late and harvest will be later, questions about the final numbers remain.
For example, only 22% of North Dakota’s corn had reached maturity by Oct. 6, compared to the 75% average on that same date. Eight percent of North Dakota’s soybeans are harvested, well behind the 48% average. Thirty-six percent of South Dakota’s corn has reached maturity and the average by Oct. 6 is 80%, while soybean harvest is 5% compared to the 36% average.
Ami Heesch, CHS Hedging market analyst, spoke of future crop scenarios and her insight into the U.S. Department of Agriculture’s crop production and supply and demand reports in a Minneapolis Grain Exchange-hosted teleconference Oct. 10.
USDA forecast corn production at 13.8 billion bushels, less than a 1% drop from last month, and increased the average yield by 0.2 bushels to 168.4 bushels per acre. The trade expected production of about 13.684 billion and a 167.5 average yield.
Heesch: “Everyone was looking for a really friendly corn number after the quarterly stocks number that came out on Sept. 30. USDA raised the yield a freckle, by two-tenths of a bushel, and lowered planted and harvested acres slightly.
“Feed and residual was increased by 125 million and USDA lowered ethanol use by 50 million bushels. Exports were lowered by 150 million bushels. That gave us a little lower ending stocks number at 1.93 billion bushels. (The trade average pre-report guess was 1.784 billion bushels of ending stocks.)
“While the report may not be as negative, I think it just wasn’t as friendly as what the market was looking for which brought the market down.”
USDA pegged soybean production at 3.55 billion bushels, a 2% drop from last month, and had an average yield of 46.9 bushels per acre, a bushel drop from September. Ending stocks were projected at 460 million bushels compared to 640 million estimated last month.
Heesch: “Soybean planted and harvested acres were reduced slightly. We lost about a bushel on the yield and used the friendly ending stocks on the Sept. 30 quarterly stocks report. Crush was increased by 5 million bushels and the lower production numbers gave us a lower ending stocks – from 640 million bushels to 460 million – but I think that’s still probably a little bit on the negative side as people were thinking we’d see a lot lower yield number, we’d see a lot less harvested acres, and we’d see a lot lower ending stocks number.”
The all wheat 2019-2020 ending stocks were increased to 1.043 billion bushels from 1.014 billion last month on lower exports and feed and residual use. What is your outlook on the wheat market going forward?
Heesch: “Winter wheat has a 56.9 stocks-to-use ratio. That’s still leaning toward the burdensome side. There was an increase in world stocks and I think that’s primarily because the European Union production was raised from 151 million tons to 152. Australia wheat production was lowered to 18 million tons and there are opinions that is going to continue to be reduced to something close to 16 million.
“The USDA said on Sept. 30 that they were going to resurvey the wheat numbers and not publish those until November. At that time there was probably 20 to 25% of the wheat crop to get harvested, and there’s still probably 10% left to be harvested in North Dakota that probably just won’t get harvested. And with the snow coming this weekend, the 10 or 12% left in Montana is probably going to be there for quite a while.
“So, I think we still have an opportunity to see some reductions in the wheat numbers coming up in the November report. I think Australia is supposed to stay dry for the next several weeks also, so we could see some changes in that, too, to kind of help with our spring wheat prices going forward.”
Do you anticipate any further production adjustments by the USDA with a harvest that is further delayed?
Heesch: “With the forecast for the next three weeks, guys are talking about how much snow they get and whether the can actually harvest the soybeans. So, we are probably up for the possibility of another reduction in harvested acres. Maybe some of the soybeans that come in after this rain and snow are probably a little bit poorer in quality, and maybe they have a little bit of a yield loss on that, although the early soybeans were looking pretty good.
“For corn, I’m not so sure. There’s been past years where corn has stood in the field all winter, it’s dried down, it’s reached maturity and has its test weight, and by the time spring came along and the ground was hard enough they could harvest it and the corn did fairly well.
“I think some of the corn in the eastern Corn Belt just isn’t there. With around 18 million prevent plant we’re going to see some shortfalls and that probably gets reflected more in abandonment to harvested acres going forward.
“I still think there are some opportunities for corn and soybeans, as well.”