Wednesday, September 30, 2020
Closing Markets: Corn +14. Beans +30. Wheat +21.
Today served as a reminder that “average trade guesses” can sometimes be exposed for what they are. The quarterly stocks report showed U.S. corn stocks as of September 1st to be 1.995 billion bu. or 255 million bu. less than the average trade “guess”. This ignited a rally that pushed both CZ and CH 14 ¼ cents higher. Commodity funds, not surprisingly, helped fuel the rally by purchasing an estimated 20,000 corn contracts as of midday. All 20/21 marketing year contracts traded to their highest levels in six months after the release of the report. Traders are now talking about a 2020/21 ending stocks number close to 2 billion bu. given the lower beginning stocks number and expectations that the October 9th WASDE report will include a decrease in corn production compared to the September report. The current 2020/21 ending stocks estimate is 2.503 billion bu. Today’s report included a downward revision in June 1st corn stocks of 205 million bu. The largest revision of June stocks in the last 20 years was in the September 2016 stocks report when June 1 stocks were reduced by 11 million bu. The weekly EIA energy production report was largely ignored. It showed last week’s ethanol production down 2.8% from the previous week and 8% less than a year ago. Ethanol inventories decreased by 306,000 barrels. Tomorrow’s export sales report is expected to include corn sales near 45 million bu.
The quarterly stocks report showed September 1st soybean stocks 53 million bu. less than traders had expected and soybeans responded to the bullish figure with a strong rally. SX settled 30 ½ cents higher; SF added 30 ¼ cents. Commodity funds were buyers of an estimated 27,000 soybean contracts as of midday. Buying accelerated as SX and SF each traded over the 20 day moving averages. The USDA pegged September 1st soybean stocks at 523 million bu. vs. the September WASDE report of 575 million bu. This implies that 2020/21 ending stocks will decrease to near 400 million bu. and possibly lower when the October crop report is released as most analysts have been talking about a decrease in soybean yield in the next report. Weather in Brazil is becoming more closely watched as this September will be one of the driest in decades for central Brazil. Most producers in this region are waiting for rain to plant soybeans. Weather forecasts are indicating much better rain chances beginning late next week. FAS this morning flashed soybean sales of 215,000 MTs to unknown destinations. The weekly export sales report due tomorrow morning is expected to include soybean sales near 74 million bu.
C +88,000 (+30,000); S +153,000 (+30,000); W -1,000 (+20,000); SM +61,000 (+12,000); BO +68,000 (+8,000)
Here is a quick analysis on the stocks report from our Merchandiser Jeremy:
The market was surprised by such a small bean stocks. Everyone I knew was predicting something in the pack based on WASDE’s bad July guess that the June, July, August quarter’s Seed/Feed/Residual would be negative (because it always was in the past) and that eventually, NASS would be raising last year’s production.
The key to this last year is that the crop wasn’t bigger (in fact, they minorly reduced the production size) and WASDE isn’t always right…
In corn, the average analyst was in lock-step with the WASDE.
In reality, I’m becoming even more convinced that the NASS’s retroactive change to the 18/19 corn balance sheet was in error. This year’s feed is now likely going to finish up at 5,850 or so, which is up from WASDE’s last estimate at 5,600.
The two changes that now happen are the 20/21 balance sheet starts out with 250mbu less carry in and as well, the market is going to assume that the WASDE’s 5,825 feed is likely underestimating reality. So the change to the 19/20 balance sheet is both the smaller start and the implication of larger feed demand for next year. Probably takes the new crop carryout from 2.5bbu down to 2,150.
It doesn’t make the corn balance sheet on paper the most exciting in the world, but remember, the USDA assumed Chinese imports at 7mmt last month when 8.8mmt was ALREADY ON THE BOOKS… so I think it’s fair to guess export demand has some upside.
Good day for the home teams… I don’t think that we can rally too hard until national harvesting % is more like 50 – 70% finished. There’s just too much overhead selling for the next few weeks. After that… or if the next report in Oct has a good yield adjustment, the market may bump around here for 30 days.
Have a great evening!!!!
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
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