Morning Grain Market Comments

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By: Dan Hueber

The USDA appears to be batting 1000 here in 2019 as each report not only provides a certain amount of surprise for the markets but a bit of controversy as well. Briefly, production for both corn and soybeans were reduced, but in the case of corn, that was solely due to a reduction in harvested acreage as they actually boosted the national corn yield by 2/10th of a bushel to 168.4, placing it in a tie for the 5th highest yield on record.

Maybe I will be surprised as todays hybrids are indeed in a new class, but with realistically only 11 to 12% of the corn harvested when the survey was taken, and gauging from a number of yield reports we have been hearing, I will be surprised if there are not further reductions in yield on future releases. I have maintained since June that we will not have a great handle on yield this year until the crop is in the bin. Before steering away from corn, I would like to point out one final element in the report. After the release of the stocks report, I noted that the size of the inventory on hand did not appear to jive with the projected feed usage and suspected that the size of last years crop was overstated. Instead of adjusting last years crop lower, they boosted the feed/residual category by 343 million bushels, pushing that category to the highest level since the 2007/08 crop year. In essence, they are not sure why the stocks came in that low. At the end of the day (or year in this case), projected ending stocks were still reduced and are under 2 billion bushels for the first time since the 2015/16 crop year. They just were not reduced as much as the trade expected.

As I briefly noted previously, bean production was lowered as well, but in case this shot was delivered from both barrels. Harvested acres were reduced by 300,000, and yield cut a full bushel to 46.9. The net result was a near halving of the ending stocks to 460 million bushels. Do keep in mind that that quantity of beans still leaves us with a very comfortable supply but does reduce the stocks to usage ration down to 11%. Exports for this year are projected to increase by 27 million, but this is predicated on another big crop in South America as well as ongoing tense relations with China. Finally, only was barely beyond 11% when the surveys were taken, and with snow now accumulating in the Northern Plains and rains elsewhere, it would not be difficult to envision further yield reduction on future reports.

In global news, we find that the French corn harvest, as the U.S. continues to move forward at a snail pace. Currently, it is estimated to be 14% complete, up 6% for the week, but 51% beyond this date a year ago. 4% of the expected winter wheat has been planted versus 15% last year. Further east, the Ukraine Central Bank has predicted a record 80 MMT grain harvest for that nation, which is significantly above the 71 MMT that is currently projected by the Ag Ministry. Finally, in Argentina, the Buenos Aires Grain Exchange has reduced the wheat production number in that country by 1.2 MMT, taking it to 19.8. Corn planting increased by 3.6% for the week and stands at 24.2%.

If we were to wrap the week right now, December corn would be up 2-cents, December wheat up 6-cents, and November beans up 15-cents. Last but not least, the U.S. Dollar is on track to close lower for a second week in a row. While this is not enough to break out the party hats, technically, it would appear to be a market on the cusp of a more significant swing lower.

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