September 12 – Bearish WASDE Hits Soybean and Corn Prices

“Thanks a lot, USDA.”

That was the sentiment from producers across the United States after the federal agency hiked yield and production expectations for corn and soybeans. Prices yo-yoed pretty heavily in the wake of the announcement. We saw a huge selloff in the first 20 minutes after the USDA released its report.

Then, we captured the instant reaction to the report.

[Here’s what you need to know.]

The machines came in and offered support later in the trading session. How did it all turn out after WASDE? Here’s our recap from the Chicago Board of Trade for Tuesday, September 12.

Corn Prices Fall; Yields Rise

The December futures contract fell 6 cents to finish the day at $3.515, while the March contract shed 6 cents to close just below $3.64.

The downturn came after the USDA surprised markets by hiking yields and production expectations in its September report. Markets largely ignored Monday’s crop quality and progress report that showed no changes to crops rated good-to-excellent.

The USDA hiked its expectations to 169.9 bushels per acre. The half-bushel increase was a surprise for traders unless they were reading the Hueber Report (who predicted 170.0 bu/ac.) Average expectations from analysts called for a yield of 168.2.

The uptick represented the third-highest yield on record, which complemented the third-largest production figure. Total production increased by 31 million bushels to 14.184 billion.

Overall, the USDA increased ending stocks for new crop by 62 million bushels. We’re looking at inventory levels for the 2017/18 cycle of 2.335 billion bushels.

Meanwhile, the agency slashed old crop stocks by 20 million bushels to 2.35 billion bushels.

On the global front, the USDA increased global stocks by 1.6 million metric tonnes from the last report. Total inventory is set at 202.47 million metric tonnes.

Soybeans Drop After Yield Hike

Soybean prices slumped sharply after the USDA hiked its yield expectations for the year. Markets largely ignored news that soybean conditions declined by 1% in Monday’s progress and quality report. Soybeans rates good-to-excellent hit 60%.

The USDA stated an average yield estimate of 49.9 bushels per acre.

That figure was far more bearish than the average analyst expectation of 48.8 bu/ac.

The November soybean contract fell 9.5 cents to close the day at $9.505. The January contract dropped 9.25 cents to close just below $9.61.

The report implied a total production increase of 50 million bushels. The USDA expects production to hit 4.431 million bushels.

The agency also reported ending stocks for new and old crops.

For the 2017/18 calendar, the USDA left ending stocks unchanged at 475 million bushels. For old crop, the agency slashed ending stocks by 25 million bushels.

Looking around the globe, the USDA dropped its 2017/18 expectations for ending stocks by 0.25 million metric tonnes to 97.53 million metric tonnes.

Spring Wheat Prices Reverse

Spring wheat contract slipped for December after the WASDE report. The reason: Production and inventory numbers were left unchanged.

The USDA left total wheat production at 1.739 billion bushels and kept ending stocks at 933 million bushels. That will put the Small Grains report in focus for September 29.

The December contract dipped 0.5 cents to close just below $6.42. The March contract fell 0.75 cents to close the day above $6.53.

In Chicago, SRW wheat contracts for December added 7.25 cents to close at $4.42.

The March SRW contract added 6.5 cents to close the day at $4.62.

In Kansas City, the HRW contract added 7 cents to close just below $4.42. The March contract added 7 cents to close the day just above $4.59.

On the global front, the USDA said that newe-crop world wheat ending stocks came in at 263.14 million metric tonnes. That figure represented a 1.55 million-metric-tonne decline from the August report.

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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