Market Analysis

With little expected to change on this year’s October crop report, the USDA’s modest decrease in its US soybean yield lead to a dramatic post-report rally that spread into the grains. With many expecting higher yields on this month’s crop update, investor short-covering set off speculative bean buying above November’s fall high pushing prices to their loftiest level since August 1. This fall’s slow US harvest west of Mississippi River and hot and dry conditions in Brazil’s largest province, Mato Grasso, delaying bean plantings may have lent some background support to the post-report price action, too.

The USDA decreased its bean yield by 0.4 bu to 49.5 bu, and 16 million bu. below the trade’s output expectations (the 4th year below the trade’s average). However, beans’ 2017 harvested area was upped by 740,000 acres because of excessive spring rainfall delaying and eventually switching corn acres to beans. These added acres made up for October’s reduced yield keeping 2017’s crop at 4.431 billion bu., unchanged. The USDA didn’t adjust its 2017/18 demand levels this month, but last month’s 44 million lower 2016/17 ending stocks carried through for a smaller 430 million bu. stocks this month, below expectations, too. 

October’s corn yield increase was larger-than-expected by 1.7 bu. to 171.8 bu. which boosted 2017/18 crop size to 14.28 billion bu., 76 million larger than the trade’s average estimate. However, the USDA also sliced 377,000 acres from this feedgrain’s harvested area curtailing this month’s overall corn crop increase to 96 million bu. After last month’s smaller 55 million carryover supplies because of strong feed demand, corn’s overall supplies only rose by about 40 million bu. to 16.625 billion. The USDA also upped its new crop feed and industrial demand by 35 million so this month’s corn ending stocks increased only 5 million bu. despite 96 million larger crop. 

What’s Ahead

With this week’s US harvest at just 22% and 36% in corn and beans, country yield update will remain important for the markets. This year’s late-season dryness seems to have impacted the beans while cool temperatures have limited the dryness ion corn yields so far. However, producers should utilize November rallies to $10.05-$10.20 range to advance sales to 60-65% while holding corn.