Talk about a bearish set of reports! Most everyone was expecting the numbers to be on the bearish side as reports from private firms have been indicating crops in incredible shape with the potential for strong yields picking up with the passing of each month. USDA tends to be a bit conservative however and that had most in the trade expecting them to confirm higher yields but to wait for their October report before getting too optimistic.
Boy howdy was that NOT the case!
In the case of soybeans, USDA left both planted and harvested acreage unchanged from their August report (84.8 million and 84.1 million respectively) but it was the big jump in yields that caught many off guard. They found another 1.2 bushels per acre of yield from the August number of 45.4 to an astounding 46.6!
The result - a massive crop of 3.913 billion bushels, well up from last months 3.816 billion. Combine that with imports of 15 million bushels and the total supply jumped to 4.058 billion bushels of beans. I am still reeling when looking at that number!
USDA increased both crushings and exports from August bringing total usage to 3.583 billion bushels. That leaves a carryover of 475 million bushels, more than THREE TIMES Larger than the past marketing year number of 130 million.
Beans wasted no time in adjusting to the new numbers and are sharply lower as I type these comments.
When it comes to corn, they did the same thing as they did with beans on the planted and harvested acreage -= they left them unchanged at 91.6 million and 83.8 million respectively.
The kicker was a huge leap in yield coming in way above what most in the trade were expecting at this stage of USDA reporting. Last month's yield estimate was 167.4 bushels per acre. That in itself is phenomenal. This month, they moved that number up to an eye-popping 171.7 bushels per acre! WOW!
the result is a total production number of 14.395 billion bushels, well up from last month's already incredible number of 14.032 billion.
USDA increased feed usage slightly ( I am not quite sure why they are doing that unless it is coming from ideas of increased poultry and hog production). Exports were increased by only 25 million bushels. Ethanol production will consume an additional 50 million bushels compared to last month's estimate.
Even with the increase in usage, carryover will end up at over 2 billion bushels of corn, not quite more than double that of last year's crop.
What is even more astonishing to me as a trader is the fact that this is occurring against a backdrop in which the hedge fund community and the large reportables are overwhelming on the NET LONG side of this market. Talk about a recipe for a trading disaster! Rarely have I seen this group get a market so wrong! My concern is that their compounding and significant losses on their positions are going to engender even more selling in the corn market!
One thing I can definitely say - if this crop manages to get to harvest without any serious frost issues ( and it is running a bit behind normal maturity), hog, cattle and chicken producers are going to be in "hog heaven".
It is about time for those guys to get a break and this is a big one. They deserve some much needed profitability, especially in the hog industry where PED virus has negatively impacted so many.
By the way, as an important corollary connected to my post last evening comparing the S&P 500 to the overall commodity sector. The GSCI did another swan dive today with these sharply lower grain prices adding more to the bearish environment for commodities in general.
Silver is looking like it is going to crack major support near $18.60 especially with soybeans swooning like they are.
Gold has lost critical support at $1240 as I hurriedly try to type these comments. It is hovering just above the bottom of a band of support extending from $1240-$1235. If it loses that, $1200 looks like it is coming.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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