USDA report, election

Farm Forum

11/15/16 — The past week was full of news, including the surprising Trump victory in the election along with a bearish USDA Nov. monthly report. Time continues to march on, with harvest being near completion as USDA raises the yields of both corn and soybeans in the Nov. 9 report last week.

First, the election took place last Tuesday, Nov. 8, with Trump surprisingly winning the electoral vote (even though he lost the popular vote). Trump was declared the winner in the wee hours of Wednesday morning, and the stock futures promptly dropped nearly 1000 points on the DOW. However, that break was short lived as by the end of the day, the DOW was up nearly 300 points for a strong reversal. The only market that seemed to be affected permanently by the election was T bonds, which showed sharply higher interest rates. (An expectation of a strong economy when Trump takes over?)

The USDA report held some surprises, with more corn production (219 mb) than expected at 15.226 billion on a yield of 175.3 bu/acre (expectations were 173.0 or a drop of 0.4 bu. rather than a hike of 1.9 bu/acre). So ending stocks of corn were at 2.403 mb rather than the 2.291 billion expected, and thus the 13c drop Wednesday in futures.

Soybean numbers were also bearish, with yield hiked to 52.5 bu/acre, up 1.1 bu when expectations were for only a 0.6 bu/acre hike. Soybean production was 43 mb larger than expected, with ending stocks hiked 85 mb (60 mb larger than expected) to 480 mb. That is a nearly 25% hike in ending stocks, and yet soybeans were only down 20c Wednesday; is more loss in the offing for the future? Wheat numbers were little changed, with ending stocks up 5 mb on smaller food use (expectations were a 15 mb hike in carryout). World ending stocks were little changed in corn (up 1.4 mmt to 218.2 mmt), soybeans were hiked considerably to 81.5 mmt (vs. 77.4 mmt expected and last month), while wheat was hiked 1.5 mmt over expectations at 249.2 mmt. Overall, a bearish report, but especially bearish corn and even more so, soybeans. The market traded lower much of last week on the bearish USDA report and the after-affects of that report.

Crop progress yesterday afternoon, Nov. 14, showed corn at 93% harvested, above the 92% normally done at this time which is a reflection of the excellent fall weather we’ve had thus far. Soybeans are 97% harvested vs. 95% normally, so they too are ahead of normal. The one crop still behind normal harvest progress is cotton at only 61% complete vs. 69% normally. Sorghum is 90% harvested vs. 86% normally, with sugarbeets 94% harvested vs. 99% normally. Sunflowers are 89% harvested vs. 81% normally. Winter wheat planted is 94% done vs. 95% normally, with 84% emerged (equal to average), with conditions up 1% this week to 59% rated G/E, well above the 52% rating last year at this time.

Weather forecasts in the U.S. shifted the precip forecast a little south from yesterday, taking some rain out of North Dakota and putting it into South Dakota and Minnesota. Otherwise the rest of the corn belt is mostly dry and will remain that way, with above normal temps still in the forecast (2-12 degrees above normal) so the cooling process is starting. The 8-14 day forecast puts more rainfall in the Lakes States especially, and temps cool considerably more. So our Indian Summer is forecast to finally come to an end.

South American (SAM) weather forecasts look similar to yesterday, and include mostly normal temps and precip except for the southern tip of Brazil and eastern Argentina, which will be relatively dry the next 2 weeks. This region will need some precip to germinate recently planted crops, so this region will need some rainfall in the near future. That is probably the only area of concern right now, though, in the SAM growing region. With Brazil ahead of normal planting (but Argentina behind normal), rainfall on these areas will start to have an impact.

We continue to target just above the old low in corn at about $3.19 Dec. and $9.49 Jan. beans to remove current hedges, of which both of these price targets are more possible with the bearish November USDA report Wednesday, where both corn and soybean production estimates and carryout projections were higher than final report but SAM weather is going to be very important the next few months as well in this mix.