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USDA Report Reaction: Higher Yields – And Market Rallies?

The August USDA report was bullish. There is no other explanation for this, as the yields for both corn and beans were below expectations at 174.6 for corn and 50 for beans.

But what about today’s September report? We saw higher returns for both and the carry-out level was also increased. You’d think the markets would be smoking, right? No, they didn’t and we will look at the details and why we reacted this way.

Look at the numbers

First, let’s look at the numbers. The corn yield has been set at 176.3 bushels per acre while the acres harvested have increased 600,000 acres. Interestingly, the hectares planted increased by the same amount as the hectares harvested. Regardless, total production increased by 246 million bushels to 14.996 billion bushels. To the only by 166 million bu. In order to achieve increased transport, we also had to record an increase in demand of 150 mb, with feed and remaining use and export each accounting for half.

All in all, US supply and demand figures released in September were certainly declining compared to August figures.

There hasn’t been that much change in soybeans. 50.6 bushels per acre was an increase of 0.6 bpa while acres harvested were decreased by 300,000 acres. Total production was only 35 million bushels at 4,374 bbu.

The stated carry has been increased by 30MB from 155 to 185, we can see that this is due to production with some minor revisions. As with corn, we put some demand back into the equation with a net result of only 10mb. Since the crush was reduced by 25 mb, but exports increased by 35, we got the additional demand.

Well, if you’re careful, we have to get 5MB “right”. Let’s say imports were reduced by 10 mb, but the carry-in from the year we just got out was increased by 15 mb, where the last 5 mb was hidden.

So how did we get a bullish reaction from a bearish report?

First, let’s look at how we acted on Friday. While corn was up 14 cents in December, it still closed at $ 5.17½, 7½ cents, or 20 cents from its highs. November beans traded as high as $ 13, up 29½ at a time. We agreed on 12.86 ½, an increase of 16 cents and 23 ¾ from the highs.

Let us now answer the question. These markets have been battered lately. Given how we have acted over the past few weeks, let alone since the August report, it is not difficult to understand that we are “expecting” a bearish report.

My preference for a report where everyone leans to one side is to consider what it will take to go further in this direction. In general, if we are already bearish, it will take a bearish report to move us further down, and this September report was certainly a good example of how that can work.

Just one thing

The last thing I want to highlight about this interesting September report is what the USDA has to say about our average cash prices for corn and beans for this new marketing year. For corn, the USDA has lowered the average cash price from $ 5.75 to $ 5.45. As I just mentioned, we currently see corn prices in December about 30 cents below the cash price the USDA expects for this marketing year.

It appears that the USDA expects prices to improve from this point on – an interesting observation from my point of view.

For beans, the average cash price has been reduced from $ 13.70 to $ 12.90 to 80 cents! Since our bean price is pretty close to that level in November, we are not seeing nearly the difference that we are seeing in corn. While I would say that USDA seems to be looking for better days in the future for corn prices, I’m not so sure they see the bean situation anywhere near as kindly.

Again, this September report was expected to be bearish, and it was. Fortunately, the response we received has been rather bullish for a number of reasons. I like the tone this sets before the harvest and I hope that producers will make the most of these good prices we are enjoying in 2021.

Don’t hesitate to contact me or anyone on the AgMarket team. We’d love to hear from you.

Contact Matt Bennett at 815-665-0462 or [email protected]

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