November 9: The November WASDE Report Hammers Soybean Prices

It was tough November WASDE report for soybean farmers. The USDA released the November WASDE report at 12 p.m. EST, and boy did markets react. Corn prices and soybean prices slumped, while wheat received a little bit of relief.

While we offered an instant reaction to the November WASDE report shortly after its release, we’re going to take a deeper dive into the report right now.

Here’s our daily recap from the Chicago Board of Trade.

Soybean Prices Slump After November WASDE Report

November soybean prices fell 12.75 cents after the USDA November WASDE report.

The contract closed the day at $9.7525. That figure is about 25 cents lower than where the contract traded a day after the release of the October WASDE report.

The reason for the decline was simple: The USDA did not slash its yield expectation in the November WASDE report. It held soybean yields at 49.5 bushels per acre. That figure is 0.3 bushels higher than the average trade analyst heading into the report.

Our Doug Kirk offered his insight today after he had conversations with farmers about the report. Doug said that people were shocked by the October WASDE report last month because the USDA had slashed — not hiked — soybean yield expectations.

This month, however, the failure to cut yields was a disappointment to many farmers.

“Most farmers I talk to finished with a yield of about 3-4 bushels lower than last year and fewer talk of higher yields than those talking of lower yields,” he said

Despite today’s downturn, it appears that soybeans still offer a better price than corn in key growing regions across the U.S.

“Looking at futures markets today, beans have by far the best chance for profitability on our farms in Central Illinois over what we could achieve with corn,” Doug said. “For the first time at least ten years, we will not have a single acre of corn-on-corn next year.”

Looking Abroad In the November WASDE Report

Now, it wasn’t all U.S. numbers that caused the downturn. After all, the USDA did cut the production total by about 5 million bushels, while ending stocks remained untouched at 425 million bushels.

The other factor centered on global production and export totals. The USDA hiked its foreign production figure for oilseeds by 2 million bushels to 446.7 million tons. This included higher expectations for soybean, peanut, cottonseed, and rapeseed production.

The noticeable gain came from Brazil. The USDA projects that Brazilian production will come in at 108 million tons. That figure is about 1 million tons higher than last month’s figure. The USDA also projected higher soybean exports from Brazil and Paraguay… and an uptick in soybean imports from Chinese buyers.

The USDA concluded on its soybean analysis by accounting for higher ending stocks around the globe, with an emphasis on China, Argentina, and Brazil.

While the November WASDE report generated the most buzz, it’s worth noting that bearish export figures weighed on sentiment as well. The USDA reported today that soybeans sold during the week of Nov. 2 came in at 1.16 million metric tonnes.

That figure was a 41% decline compared to last week.

The number is also off 53.8% from last year. The sales were driven mainly by China, who purchased about 1.157 MMT.

December Corn Gives Up on $3.50 After November WASDE Report

Will there be another bullish catalyst for corn prices by the end of 2018?

Because the USDA’s report just rubbed traders’ faces in the dirt. The December corn contract fell by nearly 2% on the day, dropping 6.75 cents. The contract closed the day at $3.415.

Blame the November WASDE report. The USDA hiked it average yield figure to an all-time high of 175.4 bushels per acre. Even the most bearish analysts didn’t anticipate this level of production.

The 3.6-bushel increase was above all published estimates.

Doug said that farmers found this number to be “shocking.” Despite ever obscene weather event that has transpired for the U.S. crop, the USDA still found a record yield. FarmLead users have expressed their doubts again about the agency’s methodology.

“In most cases, FarmLead users around the country have been surprised by higher than expected yields,” Doug said. “Few have seen corn yields at record levels across their entire acreage, but still the indication leading into this report was one of higher yield.”

Naturally, this is generating a lot of buzz in key corn growing regions.

“On our farms in Central Illinois we have just harvested the highest quality and heaviest test weight corn crops we’ve ever had,” Doug said. “Nine out of ten farmers I talk to on a daily basis are reporting something similar and, overwhelmingly, they’re talking about higher than expected yields.””

Wheat Prices Make Small Gains After November WASDE Report

SRW Contracts in Chicago breathed some life today after the November WASDE report. That’s because the USDA reduced its 2017/18 ending stocks expectations by 25 million bushels. The reason for the downturn: Higher export expectations.

The other bullish factor was the news that wheat supplies fell due to a downturn in beginning stocks.

That said, the USDA did hike its global production estimate by another 0.8 million tons. Once again, Russia is the primary culprit.

The USDA hiked its production expectations for Russia by another 1.0 million tons.

The agency also increased its export figures for both the U.S. and Russia. The November WASDE report said the U.S. number would increase by 600,000 tons. The agency set the Russian figure at 700,000 tons.

On the day, SRW December contracts added 2.25 cents on the day.

HRW contracts for December added 1.75 cents to close the day at $4.29.

Finally, in Minnesota, the MGEX December spring wheat contract added 4.5 cents to close the day at $6.48 per bushel.

About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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