On Tuesday, everyone in the agricultural sector lined up for another dose of disappointment.
Analysts spent the last month putting together calculations for the September WASDE report
How would it turn out for traders? Markets expected a downturn in corn and soy yields.
They received the opposite.
That’s right. The USDA projected corn yields of 169.9 bu/ac and soybean yields of 49.9 bu/ac.
Both numbers showed an increase from the August WASDE report, which many producers had already dismissed as both disappointing and overly optimistic expectations for corn and soybeans.
Prices immediately slumped after the release of WASDE on the futures markets.
Five minutes before the release of WASDE, the December corn contract was off 4.5 cents at $3.53.
The March contract was off 4.5 cents at $3.65.
At 12 p.m. EST, the December corn contract had slumped by 8.25 cents and traded a tick above $3.49. The March contract was off 7.75 cents.
By 12:20 EST, corn prices were off double digits.
Soybeans fared far worse with the WASDE report.
Minutes before the report, the November soybean contract was off 1 cent at $9.59. The January contract was down a penny at $9.69.
After the release, we saw a double-digit slump.
At noon, soybean contracts for November traded down 14.25 cents, just below $9.46. The January contract was off 14.5 cents.
Let’s dig deeper into the numbers.
Yield Estimates Rise
The half-bushel increase was a surprise for traders, unless they were reading the Hueber Report.
The 169.9 estimate was a tenth of a bushel below Hueber analysts projections of 170.0. The yield gains came from North Dakota, South Dakota, Missouri, Illinois, and Ohio.
Declines were projected in Minnesota, Iowa, Nebraska, and Indiana.
The 169.9 figure was well above the average analyst expectation of 168.2.
The USDA bolstered production expectations by about 31 million bushels.
The figure would represent the third highest yield on record. The agency also projected to total production of 14.2 billion bushels.
While that figure represents a 6% decline from last year’s harvest, it also represented a 1% uptick from the August report.
Markets had been expecting a decline of about 150 million bushels.
The agency also projected total harvest area of 83.5 million acres. That figure was not revised from August.
Soybean Yield Surge
On the soybean side, the average yield estimate of 49.9 was far more bearish than the average analyst expectation of 48.8 bu/ac. INTL FCStone was the closest to the pin this month. The firm’s final estimate was 49.8 bu/ac.
The half-bushel increase pushed total U.S. soybean production by another 50 million bushels.
The agency projected that production will hit a record 4.43 billion bushels. That’s a 1% jump from last month, and 3% increase from 2016.
Total harvest area is expected to hit a new of 88.7 million acres. That figure represents a 7% jump from 2016.
Revising Ending Stocks
The agency projects total corn stocks for the 2017-18 calendar at 2.335 billion bushels.
This is another bearish figure, well above the consensus estimate of 2.18 billion bushels. The figure is about a 2.8% increase from last month’s estimate.
On the soybean front, the USDA projected total ending stocks at 475 million bushels. That figure was unchanged from last month.
However, analysts had expected about a 7% decline from last month’s WASDE report.
Finally, the USDA said that ending wheat stocks woud remain unchanged from last month’s estimate of 933 million bushels.
Once again, analysts had expected a decline. Consensus expectations was 920 million. In the first hour after the release of the WASDE report, spring wheat futures fell by double digits.
On the global front, the USDA projected 202.5 million metric tonnes in ending stocks for 2017-2018.
The agency also set global production at 1,032.6 million metric tonnes, a figure that represented a 3% decline from last month.
How should markets feel?