October 12: Soybean Prices Surge after October WASDE

Soybean prices surged Thursday after the USDA’s October WASDE report came in with a slew of surprises. And what a day it was at the Chicago Board of Trade!

Wheat prices tried to follow the soy complex higher, but the reality of the USDA data sunk in later in the trading session. Corn prices showed some small gains.

Spring wheat was the worst performer on the day. We took a small dive into the numbers earlier at our Insights Blog after the October WASDE report. Read our Instant Reaction, right here.

Let’s take a deeper dive into the numbers today at the Chicago Board of Trade.

Corn Prices Push Higher

Corn prices made gains on the big board in Chicago. The uptick came despite news that the USDA raised its forecast for average yields. The agency projected an average yield of 171.8 bushels per acre. That estimate was a 1.9 bushel increase from last month’s WASDE report.

December corn contracts increased by 3 cents. The monthly contract closed the day at $3.49.

Prices were hovering for the December contract just above $3.50 during the afternoon. They retreated when some traders took profits off the table. The March contract added 3.25 cents and finished just a tick below $3.63.

The uptick was caused by news that ending stocks fell to 200.96 million metric tonnes. This estimate was below the 201.91 expected by analysts and 1.51 million metric tonnes lower than the September number.

U.S. ending stocks barely moved from last month’s report, gaining five million bushels to hit 2.34 billion bushels (59.44 million metric tonnes).

In addition, total production was revised upward to 14.28 billion bushels (or 362.7 million metric tonnes) for the 2017/18 calendar.

Who Rules the (Corn) World?

The 362.7 million metric tonnes this year is a 5.7% decline from last year’s production as the chart below explains.

As the chart explains, corn production is expected to fall in Brazil (particularly as farmers shift toward soybeans for a better price. The USDA expects that most major corn producers will cut production. However, Canada is likely boost production by 6.8%, while Argentina will increase production by 2.4%.

Data from the Energy Information Administration took a back seat to the WASDE report. Today, the agency said that ethanol production has declined to 967,000 barrels per day for the week ending Oct. 6.

That figure is a troubling figure given the 43,000 bpd decline has pushed production below the 1 million mark. This was the lowest production total we’ve seen in a year.

Soybean Prices Rocket Higher

It was a banner day for soybean prices.

The January contract for soybeans shot above $10.00 after gaining 26.5 cents. The ZSH18 closed at $10.025. The November contract added 26.75 cents and closed the day at $9.92.

Markets were stunned by the USDA’s surprise cut to yield expectations for the crop. Analysts had expected the agency would show a small increase to 50.0 bushels per acre.

The USDA went the other way, reporting an average yield of 49.5 bushels per acre. That caused soybean prices to jump quickly.

The agency also reported no change in U.S. production (4.431 billion bushels). The agency also increased acreage expectations by 800,000 to 89.5 million acres for the 2017/2018 year.

The 348 million metric tonnes expected from global production is a 1% decline from last year’s October WASDE report. (Wheat and corn production expectations are also lower than last year’s report).

The agency did, however, slash the ending stocks figure by 35 million bushels. This was the result of a reduced carry over from the previous marketing year.

Wheat Prices Retreat on Rising Russian Production

Soybean prices were on the rise, but what about wheat?

The USDA may see a small reduction in global wheat production from last year’s October WASDE report, but Russia continues to be a significantly bearish factor for prices. This report showed Russian production — estimated at 82 million metric tonnes — would a 13.1% increase from the same report last October.

As you can see below, India and Russia have seen massive gains in production expectations compared to the previous marketing year.

Drought ridden nations like the U.S., Canada, and Australia have shown huge declines from last year.

The USDA did upwardly revise U.S. wheat production estimates (barely) from 1.739 billion bushels to 1.741 billion bushels. That was just a two million bushel increase.

Meanwhile, U.S. stocks increased more than analysts had expected.

The USDA said that production jumped from 933 million bushels to 960 million. Average expectations called for the agency to report 946 million bushels.

Wheat Prices in Retreat

In Chicago, SRW wheat contracts for December shed 2.75 cents and closed at $4.305. The March contract dropped 2.75 cents and finished at $4.495.

The HRW contract in Kansas City was off 2 cents for December. The KEZ17 contract finished the day at $4.2625.

Meanwhile, the HRW contract for March dropped 2 cents and closed at $4.445.

In Minneapolis, the spring wheat contract dropped 7.75 cents and finished the day at $6.1125. The March contract closed the day down 7.75 cents and finished at $6.25 per bushel.

What’s On Tap Next? Where Will Soybean Prices Go Next?

Finally, with so much action in this market today, it can be hard to know when is the time to begin marketing and selling you grain. Better yet, how will you know during the calendar year when it’s time to make a sale so you can lock in the best price possible.

We’re going to be talking about this a lot more in the coming weeks. And it’s going to be quite revealing when we dig into the numbers and unveil one of the most powerful tools you can use to sell your grain for more. Stay tuned here at Grain Markets Today.

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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