USDA September WASDE Commentary
Wednesday, September 12, 2018, 3:09 PM
Submitted by: Landus Cooperative
Good afternoon –
“Big crops get bigger” as the saying goes. Well, today was no exception. Corn and wheat both took it on the chin, closing down 13c and 10c respectively. Soybeans, in the face of a wave of feed grains sellers, was able to close 8c higher. The USDA, using record implied ear counts and ear weights, printed a record corn yield of 181.3 bu/acre, 1.3 bu higher than the highest of trade estimates (and 2.9 bu/acre higher vs August). Needless to say, that was a shock to the market. Last month, the USDA counted ears/acre to arrive at a yield estimate. September is thought to be “more accurate” as USDA incorporates ear weight into the equation. At any rate, 181.3 bu/acre balloons production to 14.8 bln bu, nearing 16/17’s 15.1 bln bu performance. Geesh. There were a few changes to the demand side of the ledger (increased feed usage, increased exports, and increased ethanol usage). All-in-all, carryout for 18/19 grew 90 mln bu to 1.774 bln bu.
Equally as shocking were individual states’ yield estimates. Illinois is sitting at a staggering 214 bu/acre (201 is the record). Iowa is at 206 (203 is the record). Records are also being posted in IN, OH, WI, NE, and SD. We’ve been under the opinion that a global feed grains story is setting up some bullish surprises, given poor wheat performances in Australia and the Black Sea region. It appears that narrative is holding less and less water. USDA dropped Australia wheat production by 2 mmt, but increased Russia by 3 mmt and the FSU (former Soviet Union) by 3.5 mmt. These are tough headwinds for both corn and wheat to overcome.
Soybeans, in a relatively surprising fashion, was able to juke the corn & wheat weakness and close 8c higher today. USDA increased soybean yield by 1.2 bu/acre, pushing 18/19 ending stocks to 845 mln bu (that’s a really big number). The stocks-to-use ratio is pushing 20%. In the news cycle were reports of the Trump Administration reaching out to the Chinese in an effort to continue trade negotiations – it’s likely this is what brought some support to the soybean market. State yields have IL at 66 (record 59), IA at 60 (record 60), and MO at 47. States with estimated record yields are NE, IN, OH, and AR.
With this report in our review mirror, we look to anecdotal yield reports, harvest weather, the October WASDE report, and the upcoming South American growing season. Any advances on trade relations will certainly help, but timing is unknown for any resolutions. In the meantime, please work safely this harvest season.