Morning Comments November 10, 2021

Cornboard Field 042221

Corn 2 to 3 higher

Beans mixed- beans steady to higher

The soybean market caught a nice bid after the USDA surprised traders by lowering yields instead of increasing them as expected. Corn and wheat didn't get much of anything surprising from the report but were able to show some strength thanks to outside markets.

As we had talked about yesterday morning, traders had made some extremely bearish bets on what the USDA would say about crop production, demand and subsequent ending stocks for soybeans ahead of the report. While the USDA did begin the well-advertised move to lower export expectations, the 0.4 bushel per acre reduction in yields, when traders were expecting a similar increase caught most market participants off guard. 

The reduction in production from last month helped to offset much of the 40 million bushel reduction in export projections. At 340 million bushels, soybean carryout is still more than adequate, especially in the face of what is expected to be a 144 million metric ton Brazilian crop (5.3 billion bushels versus US overall production at 4.4 billion). But the idea ending stocks didn't grow to 400 million bushels or more as some feared, brought buyers back into the market in size--especially after the recent 80 cent sell off had made prices relatively cheap comparatively speaking.

Global figures were left relatively unchanged for beans with Brazilian production steady, Argentinian production increased slightly and Chinese demand static.

Over in corn, the numbers came in relatively close to expectations. The USDA bumped yields up ever so slightly to 177 bushels per acre. We saw some interesting state by state increases in yield estimates with Minnesota seeing the largest bump as it turns out timely rains provide the biggest benefit to production, even if they aren't enough to bust a drought.

As expected we saw a 50 million bushel increase in corn used for ethanol offset all of the increase in yield, with carryout coming in 7 million bushels lower than last month. At 1.493 billion bushels worth of carryout supplies are adequate, but far from burdensome.

Global ending stocks for corn came in higher than traders were expecting though much of the shift came from minor adjustments to the supply and demand outlook in several countries.

Wheat figures came in close to expectations with adjustments made for food use, imports and exports. At 583 million bushels of carryout, wheat is much tighter than we've grown accustomed to over the last handful of years. While global figures still show a stocks to use ratio that is relatively comfortable, the numbers are a bit skewed by Chinese supplies.

Looking ahead, we're back to outside markets and investor interest taking control. Now that the USDA November number is out of the way we are really on autopilot when it comes to overall fundamental adjustments until the January report. We will get updated December figures, but they tend to be more of a 'copy and paste' from the November numbers than anything else historically.

We will get updated FSA acreage numbers at some point today and while traders aren't expecting much of anything from them, they could shake things up a bit if there are any major changes from numbers released in September.

Energy markets will be watching this morning's EIA data closely. According to industry insiders API data indicates we will see a decline in crude supplies in this week's report. The oil market recovered most all of its losses last week after the Biden administration did nothing to take OPEC+ to task on its slower than requested supply increase.

Energy secretary Granholm said the administration would make an announcement this week on any moves it would make to cool energy prices. However the EIA released their Short-Term Energy Outlook yesterday indicating bearish expectations for supply and demand for the remainder of the year into the first quarter of next. Many believe the administration may take those figures to heart and hold off on any moves to increase supply availability.

We will also see updated ethanol figures. Production is expected to remain stout with stocks the most important figure as it gives us a better indication of demand and where the ethanol market itself could head price-wise.