October 11 – WASDE Report Worries Hit Grain Prices

Corn prices and wheat prices retreated Wednesday ahead of the October WASDE report.

After the last two reports, it’s fair to argue that everyone is in a bit of a bearish mood ahead of Thursday’s release of the WASDE report. But it’s wasn’t just WASDE jitters that had markets turning red.

The Tuesday crop quality and progress report offered a mix of positive and negative news. We saw gains in the corn and soybeans rated good-to-excellent, a bearish piece of information. However, we also saw that farmers are well behind the five-year harvest average. While both pieces of information might have canceled each other out, the reality is that we’re seeing a lot of bearish forecasts for yield, production, and global stocks ahead of tomorrow’s WASDE report.

Here’s our recap of trading at the Chicago Board of Trade.

Corn Prices Hit One-Week Low

Corn prices were at their lowest levels in a week as the bears stare down the October WASDE report. We saw yesterday that just 22% of the harvest has been completed, which is positive for prices and a sign that new crop won’t flood the market right now. The five-year progress average for this time of year is 37%.

But the amount of corn rated good-to-excellent increased once again – to 64%.

The December corn contract fell 3.25 cents and closed the day at $3.46. That number is cutting it very close to the one-year closing low that we saw back in August.  The March 2018 contract dropped 3.25 cents and closed the day at $3.595.

We saw a lot of price movement back at the end of September with the quarterly stocks report. So how much of a surge or plunge are we in for on that December contract tomorrow?

What Will Corn Yields Be?

Our Doug Kirk projected that he anticipates that corn yields will increase by one bushel to a bushel and a half tomorrow. Is history on his side?

Last year, the USDA cut its October from September yield expectation by 1 percentage point. In 2014 and 2015 they pushed the number higher by 2.5 points and 0.5 points, respectively. The last time that there was a significant cut to the yield expectation was in 2010 when we saw a 6.7-point cut.

This year, the average yield estimate is sitting at 170.1 bushels per acre. That average is two-tenths of a bushel higher than the September estimate.

On the global front, we noted Tuesday that Brazil’s corn crop continues to decline as farmers turn to soybeans for the better market price. We received additional confirmation of CONAB’s sentiment. Today, Celeres lowered its first-season crop production figure to 28.1 million metric tonnes. They also reported that acreage would decline by 15.3% to 13.42 million.

Soybeans Dips Before WASDE Report

Soybean contract prices were mixed on Wednesday. The November futures contract dipped 0.75 cents to close the day at $9.76

Soybean cash prices have also been sliding over the week. Turns out that we’ve seen quite a bit of challenges for elevators to clear corn storage for soybeans.

There is a gentleman’s bet in our office on whether the soybean yield will be below or above 50.0 in the WASDE report.

That number the average analyst estimate… 50.0 bushels per acre for soybeans.

I’m actually going to place it at 50.0 bushels per acre despite the growing chatter and bearish sentiment among traders. It’s obviously not a big gain from the 49.9 bushels per acre, but there’s a psychological component to this number, and a tenth of a percentage point can cause quite a stir in Chicago.

The USDA has done a 0.1 percentage point gain in October twice in the last nine years (2008 and 2015). They have revised the figure upward in four of the last five October reports.

While markets anticipate a slight uptick, they are also anticipating a cut to global end stocks. The current estimate sits at 97.2 million metric tonnes.

What’s Happening in Brazil?

On the global front, we also saw today that Celeres expects that the 2017/2018 soybean production figure will drop to 109.8 million metric tonnes. But let’s be a little careful on how we react to the word “drop.”

Brennan touched more on CONAB’s latest estimates and how it will affect soybean prices here in the United States in the Daily Breakfast Brief.

This is a massive crop production total. Sure, last year the nation saw a record harvest of 114 million metric tonnes, and dryness had delayed planting across key regions of the country. But that 109.8 million metric tonnes figure is still well ahead of the 107.0 figure estimated by the USDA.

We’ll want to pay close attention to see if the USDA changes this estimate tomorrow. As we noted, Brazil continues to keep the world awash in soybeans.

Don’t expect the USDA to move this needle very far, if at all.

WASDE Report Weighs on Wheat

In Chicago, the December SRW contract closed the day at $4.3325 after a two-cent decline. March SRW contracts closed at $4.5225, a 3-cent decline from Tuesday,

Down in Kansas City, HRW contracts shed 3 cents and closed the day at $4.2825. The March contracts closed at 2.75 cents to finish a tick below $6.33.

Finally, in Minneapolis, spring week contracts were making some slight gains. The December contract added 1.25 cents and finished at $6.19. The March contract added 1.25 cents to close the day at $6.3275.

In the wake of Russia’s big uptick export figures, the numbers to watch are the end stocks for both the United States and the world. Average estimates call for the USDA to reduce world wheat stocks by about 340,000 metric tonnes to 262.8 million metric tonnes.

Other Key Factors

The Federal Reserve released minutes from its September FOMC meeting. Investors were looking for some insight into the central bank’s plans to wind down its $4.6 trillion balance sheet. In addition, markets are wondering when – not if – the Fed will raise interest rates again.

Moving forward, we have some very big news on the way here at FarmLead.

If you want to know more on how and when to get the price for your grain, stay tuned.

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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