Market Analysis
This month’s USDA crop report followed the trade’s general script with September’s corn & soybean yield declining near expectations as Iowa’s Derecho and this year’s late season US dryness dropped production across the Central Midwest from last month. The surprise was the limited downward reacts to these neutral Ag Dept numbers to the trade estimates. Given the possible further decline of both US corn & soybean outputs and China strong ongoing purchases of both these crops, the commodity world’s investors (the funds) remained supportive vs. taking profits which held prices firm into the close.
September’s US corn (CORN) output was placed at 14.9 billion bu with 178.5 bu. yield which was down 378 million bu. and 3.5 bu. in yield vs. last month and only 2 million bu in output and 0.2 bu higher yield then the trade averages. The USDA resurvey of Iowa’s Derecho wind damage dropped this state’s harvested area by 550,000 acres. In the central US, Iowa (-11 bu.) and many other states (IL-4,IN-2,OH3,NE-3,MO-5 & KS-7) yields were also reduced because of July & August dryness. The USDA did slice 30 million in old -crop exports, but upped 2020/21 shipments by 100 million. However, new-crop ethanol & feed demand were dropped 100 million each resulting in 2.5 billion bu 2020/21 carryover, off 253 million from August.
This month’s US soybean (SOYB) forecast also dropped 108 million bu. to 4.313 billion vs. August & was only 18 million bu. over the trade’s forecast. This month’s US bean yield declined by 1.4 bu. to 51.9 bu. vs. the trade’s 51.8 bu. yield estimate. Similar to corn, yields in the C. Midwest led by IA (-4 bu) and others (IL-2,OH-2,MI-3,NE-2,SD-2,MO-2 & KS2) were down this month. The USDA upped both old-crop crush (+10 mil) & exports (+30 mil), but left their 2020/21 demand levels unchanged resulting 460 mil ending stocks.
No change in wheat’s US S&D table ahead of USDA’s 9.30 Small Grain Report, but higher Canadian (+2 mmt) and Australian (+2 mmt) crops upped the USDA’s world stocks estimate.
What’s Ahead
Reduced US 2020 corn and bean crops and Chinese buying have firmed prices to current levels. Ongoing aggressive Asian buying and La Nina inspired S American dryness will be needed to keep the funds supporting CBOT with the US harvest approach. Early yields will be watched closely.
Have new-crop corn & bean sales at our previous 30-33% hedge levels given the erratic fall storage situation.
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