One word sums up what market analysts were thinking in response to USDA's October crop report, which forecast U.S. corn production at 11.6 billion bushels — Wow!
“There were expectations of higher yields across the United States, but to jump 652 million bushels from last month and 1.5 billion bushels from last year definitely takes a little of your breath away and likely will take a little of our price away, accordingly,” said Jerry Gidel, an analyst with Midland Research, during a Chicago Board of Trade press briefing.
Estimated soybean production was also breathtaking at 3.1 billion bushels — up 89 million bushels from the average trade guess, and 270 million bushels from last month's USDA estimate.
Of course, both corn and soybean production and average yield would be records, if realized.
Soybean ending stocks were estimated at 405 million bushels, more than doubling September's forecast of 190 million bushels, while corn ending stocks were estimated at 1.6 billion bushels, up over 400 million bushels from last month's estimate of 1.2 billion bushels.
In its October World Agricultural Supply and Demand Estimates, USDA also forecast increased demand for feed use in corn and a slight decline in exports. Export prospects for soybeans and crush were raised, and in a glimmer of hope longer term, the Brazilian soybean crop was lowered, because of lower prices.
The bin-busting crops “set up a 1994-type scenario, when we saw this level of increase from the August report to the November report, which ended up dragging the market down,” added Marty Foreman, Doane Agricultural Services.
“Even though we offset the high corn numbers somewhat with higher usage, there is still some skepticism on how strong exports might be.”
Wheat fundamentals “look a little more favorable based on USDA's latest revisions,” added Foreman. “We bumped up exports to 975 million bushels. With about a third of the marketing year behind us, wheat exports are tracking close to a year ago.”
Because of the record-breaking production, corn will make a run toward contract lows, according to Foreman. “Technically, there's some support down around $1.90. There is also the prospect for further upward revisions in the crop next month.”
Over time “corn prices should drift sideways for a few weeks, then begin a slow rebuilding process,” Foreman says. “Corn's demand base is still very strong. Once we get out to spring, we still don't have a huge cushion, and a short crop could pull stock levels back.”
Gidel says the soybean market will “press our recent lows of $5.20. In the short term, with harvest pressure peaking in mid- to late October, we could approach $5 and possibly $4.80.”
Longer term, “the economic rebound in the United States is still in good shape,” Gidel said. “There is some talk about El Niño becoming more of a factor in the southern Pacific, which could have an impact on U.S. production.”
According to Foreman, the difference between September and October USDA corn and bean production estimates might be explained by ideal September weather which increased grain/pod weight substantially. “That's what is really pushing these corn yields up, in addition to record high ear counts.”
The high yields forecasted underscore the importance of early planting to yield potential, according to Foreman. Two-thirds of the southern Corn Belt was planted early to corn. Lack of heat, plenty of moisture and good hybrids, helped the crop break through old yield records.