Market analyst: October USDA numbers are bearish

Ray Grabanski
Special to the Farm Forum
Columnist

USDA released the October report recently, raising corn and soybeans yields, ending stocks and lowering prices.

It was a positive report, however, for wheat. It now appears we'll have plentiful corn and soybean stocks for the coming year, but wheat will be considerably tighter. 

Soybeans saw the biggest jump in the October report, going from 185 million bushel ending stocks projected in September to 320 million bushel ending stocks in October — essentially twice as large!

Its not often we see a nearly 100% increase in projected ending stocks in one month. That makes soybeans not even remotely tight in ending stocks anymore — quite a change in numbers.  Most of the increase came from a 0.9 bushel per acre increase in soybean yields to 51.5 bushels per acre, and the rest came from the hike in stocks from 2020 crop production made in the Sept. 30 report. So overall, this was a very bearish report for soybeans.  

Corn ending stocks weren't nearly as big a change, but with soybean stocks more plentiful, corn won't have to compete much with soybeans for acres in 2022. Corn yields were hiked a much more modest 0.2 bushels per acre to 176.5 bushels, with ending stocks up to 1.5 billion bushels. In September, those numbers included 1.408 billion bushels versus traders expectations of 1.421 billion bushels.

So, the report was bearish on corn, but not nearly as bearish as soybeans.  

Wheat was a completely different animal, with ending stocks cut by 35 million bushels to 580 million bushels, the lowest since 2007 and 2008 (when prices were very explosive). World wheat ending stocks were also tightened to 288.4 million metric tons versus 292.6 million metric tons in September. So in contrast to corn and soybeans where the report was bearish, the wheat numbers were all on the bullish side.  

Weather forecasts are turning drier, with below normal precipitation forecast the next week for all but North Dakota, South Dakota and Wyoming. There is snow in Montana, Wyoming, Colorado and Arizona that will move eastward, but likely warm to rain.

Temperatures will remain above normal for the next two weeks, and there will be almost no rain in the 8-14 day forecast anywhere in the Corn Belt. Essentially, this forecast means harvest might be nearly over in October this year.  

Pro Ag was expecting no bullish news in the October USDA report because our yield models are little changed from September. However, actual harvest yields have been surprisingly good in most corn belt locations, with both corn and soybean yields better than expected in many areas, including the dry northwest Corn Belt.

Rains arriving as late as Aug. 20 revived yield potential in the northwestern Corn Belt. The best land fared the best (as always), with subsoil helping crops persist until the rains arrived. Poor soils fared much worse, with the lightest soils having pretty much zero production of corn or soybeans due to drought.  

But the yields in better soils are surprisingly good. The same can be said for many Corn Belt locations. That propelled USDA to hike yields aggressively for soybeans and modestly for corn in the report. The largest production hikes were for Iowa, Minnesota and Nebraska, which are the areas expected to be hardest hit by drought.

But the late rains revived yield potential in many areas (especially the better soils).  The bushels in the combine hoppers were larger than expected very often this fall, and that resulted in higher yield projections by USDA.

That takes the edge off the markets now, especially corn and soybeans, as the extra stocks will make things much more comfortable going forward. With recent rains replenishing soil moisture deficits in northwestern Corn Belt areas, prospects are much better for next year, too.

Ray Grabanski can be reached at raygrabanski@progressiveag.com.