November report neutral

11/11/14 — USDA came out Monday, Nov. 10 with their monthly production and supply/demand update, and in it were some small surprises, but for the most part was about as expected. The big numbers were corn and soybean production, but demand was also updated as well as ending stocks numbers.

USDA’s report surprised some traders with a smaller corn yield projection at 173.4 bu/acre (down 0.8 bu/acre from last month) and vs. expectations of 175 bu/acre. Yields were reduced 2 bu/acre in IA, 3 bu/acre in KS, 1 bu/acre in MI, 5 bu/acre in MN, 1 bu/acre in OH, and 5 bu/acre in OK. Soybean yields, however, were hiked 0.4 bu/acre as expected to 47.5 bu/acre. Carryout numbers for corn were lowered to 2.008 billion bu, down 73 mb and vs. expectations of 2.132 billion, so that was friendly for corn. But soybean ending stocks were at 450 mb (unchanged from October) and vs. expectations of 441 mb. Another small surprise was a cut in wheat production such that ending stocks were at 644 mb, down from Octobers 654 mb and expectations of 657 mb.

World ending stocks of corn were up to 191.5 mmt (up 0.9 mmt), wheat up 0.3 mmt to 192.9 mmt, but soybeans were cut to 90.3 mmt vs. 90.7 mmt last month. Overall, there were not any big surprises or changes in the November report, as ending stocks were close to expectations for the most part. World numbers were little changed, with corn/soys both left unchanged in SAM, and the only other changes a reduction in Australian wheat of 1 mmt (to 24 mmt).

Crop progress was also released Monday afternoon, November 10, with corn harvest at 80% complete (now equal to normal) and soybeans 90% harvested (vs. 91% normally). Sugarbeets are 98% harvested vs. 96% normally, with MI and ID the only states with any harvest remaining. Sunflowers are now 70% harvested, ahead of the normal pace of 69% as harvest has been rapid the last 2 weeks under mostly dry conditions. Winter wheat is 93% planted, equal to average and 83% emerged, ahead of normal 79% emerged. Winter wheat conditions improved 1% to 60% rated G/E, still behind last year’s 65% G/E.

A 2 billion bushel carryout in corn and a 450 mb carryout in soybeans is large, and is not likely to lead to significant rallies this winter. Instead, now that production is widely known for 2014, it’s likely prices will languish in the current price area for a while. Because of the high meal prices, soybean prices have risen substantially in October as the pipeline for meal was empty, and buyers bid up the price for available supplies. However, in the next few months crushing plants are likely to restock inventory levels, and we could see prices drift lower for a period.

Export demand for soybeans have been outstanding, with excellent weekly export sales and shipments of soybeans. That is supporting soybeans as well. But wheat and corn export sales/shipments have been somewhat pathetic, so we are seeing some weakness in these two markets as the winter sets in.

Due to the rally last month in October, Pro Ag looks for grains to languish in the area of $8.50 to 10.50 the rest of the winter for soybeans, and $3.20-$4 for corn as well. Wheat is drifting sideways as well due to slow demand. The upside will remain limited due to the large stocks of corn and soybeans left as we harvest what is a record large crop. We note that yesterday we went above $10.50 in Jan beans and $4.05 July corn (good places to make catch up sales, corn in a storage hedge).