Commodity markets are seeing a price boost Friday, after USDA released its October crop reports. Despite USDA making only slight adjustments to corn and soybean national yields and production, the soybean market viewed it as a friendly report.
“It’s certainly friendly for soybeans and I'd say neutral for corn , and the way that this trade setup where the funds are buying, it's pretty tough to get in front of the freight train right now,” says Matt Bennett of AgMarket.Net.
In its October report, USDA left soybean yield untouched at 51.9 bushels per acre, but due to a cut in harvested acreage, USDA did lower total production slightly to 4.26 billion bushels. However, the largest adjustment came to carryout.
“I'd say the biggest surprise was 290 million bushel carryout on soybeans,” says Bennett.” Yes, we lowered production on corn and beans but I think that was expected. Most of the traders were looking for that looking for a revision lower for stocks numbers for both corn and beans. Those happen but a 290 million bushel carryout on beans, it's probably a little light for some people, but with that being said, I saw one estimate for the report under 200. So, there's a lot of low numbers out there and good reason for that.”
Bennett says that reason stems from limited supply. He says yields aren’t getting bigger, at a time when soybean demand has been outstanding. So, those factors are aiding soybean prices.
On corn, USDA lowered the yield just a touch, to 178.4 bushels per acre. That compares to the 178.5 pegged in September. With a reduction in projected harvested acres, that prompted USDA to trim its 2020/2021 corn production forecast this year to 14.7 billion bushels, which is 1% lower than the September report.
Bennett says the biggest puzzle piece now on corn is what USDA does to corn export projections.
“It’s going to be very interesting how the USDA handles exports,” he says. “For instance, USDA has Chinese exports still pegged at 7 million metric tons. We already have commitments of almost 10 million metric tons from just the U.S., and most people say it's 12. So, I don't know what they're doing there, but we’re going to find out as we go through the coming months.”
Bennett says while it’s hard to project what USDA will do to U.S. production and yield from here on out, he thinks the dryness in August may impact late-season harvest reports. If that happens, Bennett thinks USDA may have more room to trim overall corn and soybean production forecasts in the U.S.