Our markets were all firmer last night, following through from yesterday’s reports from the USDA which gave the trade unexpected production cuts and moved our markets higher. The USDA’s August corn yield estimate came in at 174.6 bpa, which was nearly 3bpa lower than the average trade estimate. Turns out the big declines in Minnesota, North Dakota and South Dakota were more than enough to offset the strong yields to the east in places like Illinois, Indiana, Ohio and Michigan.
As for soybeans, the reaction was a little quieter. The USDA did end up with a slightly smaller yield estimate at 50.0 bpa, only to offset that with reduced crush and export demand leaving carryouts unchanged. I stuck a few maps and charts at the bottom of these comments to give you some perspective on production; you can pick out the haves and have-nots pretty quickly.
Taking a step back, even with the production cuts in corn, the USDA only slightly adjusted the carryout projection for next year, keeping it just over 1.2bbu which wasn’t far from the trade guesses. They did that by reducing demand for corn, namely feed and exports. Now remember, it is normal for the August report to focus more on the supply side of the equation, as that is actually easier to predict today than a full year’s worth of demand. Lots of variables.
Of course, as the supply side become more known/fixed, the questions (and arguments) will start to be about the demand piece. I’m sure there are traders out there still re-working their spreadsheets this morning, trying to figure out what this all means for the carryouts next summer. Depending on your opinion on demand, you could make the case for next year’s corn carryout sliding at/below 1.0 bbu. This story is not yet written.
Corn is 6 to 8 cents higher
Soybeans are 10 to 15 cents higher