- The October USDA crop report was supportive with Chicago corn, soybeans and wheat rallying to moderate gains following the report. The data confirmed a 600,000 acre decline in US soybean harvested acres (FSA data), while the US soybean yield rose to 53.1 bushels/acre. The US 2018 corn yield was fell by 0.6 bushels/acre to 180.7 bushels/acre. We expect that based upon extremely wet weather and saturated fields that US corn and soybean yields will decline in November. The USTHATS yield data is becoming “solid” as 80% of the NASS corn test plots had been harvested with 14% in dent and measured in the lab. The October NASS data allows the marketplace to focus on demand with US corn/soybean/wheat crop sizes largely determined. The data confirms that US corn and soybean futures scored their seasonal/annual lows in mid-September. We maintain that the grains will continue to outperform the soybean complex in the next 45 days.
- NASS estimated the 2018 US corn yield at 180.7 bushels/acre, down 0.6 from September and near the lower end of trade estimates. NASS did not alter US corn seeded or harvested acres based on FSA data. US corn ear weights were record large, but ear numbers declined from last month. The US 2018 corn yield is still record large, but latent and wet harvest efforts in the W Midwest are likely to produce additional ear loss. We see the 2018 final US corn yield closer to 180.2 bushels/acre. US 2018/19 corn end stocks were forecast to rise 39 million bu to 1,813 million. We expect that WASDE is still too low with its US corn export estimate by 25-50 million bu, and that US ethanol corn use could rise by 75-150 million bu. Both (and the fall in US production) could tug US 2018/19 US corn stocks to 1,650-1,675 million bu. Such stocks argue for a rally to $3.80-3.90 basis spot Chicago futures. Corn appears to be caught in a $3.60-3.85 range with normal S American weather for their new crop.
- NASS cut the US soybean harvested acres by 600,000 acres to 88.3 million acres and raised yield to 53.1 bushels/acre. The yield came in below trade forecasts and did not score a record. Amid the extra 43 million bu of old crop stocks, US soybean total 2018/19 supplies were record large at 4,690 million bu. WASDE increased its 2018/19 US soybean end stocks forecast to 885 million bu, up 40 million from September. Such stocks are record large but expected. USDA made no changes in 2018/19 US export or crush estimates with total US soybean demand estimated at 4,268 million bu. This is down 28 million from last year. WASDE estimated the average US farmgate price at $8.60 which argues that the downside price risk in spot Chicago soybeans is limited below $8.00. We maintain that spot Chicago soybeans will hold in a range of $8.00-9.00 until there is evidence that the US/China will head to the negotiation table.
- US 2018/19 wheat stocks were raised by 21 million bu to 956 million. The increase was based on increased supply and a 10 million bu cut in feed demand. The average farmgate cash price is estimated at $5.10. The downside price risk in December Chicago wheat is likely no more than $5.00. WASDE lowered the 2018 Aussie wheat crop by 1.5 million mt to 18.5 million while Russia crop was dropped 1.0 to 70 million mt. WASDE held its Canadian wheat crop estimate at 31.5 million mt (even with 40% of the crop under snow). We note that WASDE held its Russian wheat export estimate at (a too high) 35 million mt and EU wheat export estimate at 23 million mt. US fob wheat is cheap in relation to other destinations, but USDA will be conservative. We maintain that the outlook for Chicago wheat is bullish on budding US export demand. This is no place to turn bearish of wheat.