Todd's Take

Heading into Thursday's report there was widespread concern that big crops would get bigger -- not necessarily by large amounts, but bigger nonetheless. USDA eased those fears at 11 a.m. CDT with a corn crop estimate of 14.78 billion bushels (bb), based on a lower yield of 180.7 bushels an acre (bpa). Similar for soybeans, USDA's crop estimate of 4.69 bb was unchanged from the previous month, sporting a higher yield of 53.1 bpa, but applied to fewer harvested acres.

For wheat, there were no surprises on the domestic front. 956 million bushels (mb) of U.S. ending wheat stocks reflected the findings of USDA's Grain Stocks report from Sept. 28.

As far as exports were concerned, USDA was willing to boost the corn estimate by 75 mb to 2.475 bb, and the increase was well deserved. U.S. corn shipments are up 67% so far in 2018-19.

For soybeans and wheat exports, USDA looked out of touch, keeping September's estimates intact even though total commitments are down 18% for both in the 2018-19 season. USDA's theory that a drop of nearly 4% in world wheat production should boost U.S. exports 14% has yet to find any evidence in the weekly totals.

For corn prices overall, there was nothing specifically bullish in Thursday's estimates. After all, 1.81 bb of U.S. ending stocks is still a comfortable supply of U.S. corn. However, after several months of anticipating a large corn crop, Thursday's crop estimate looks unlikely to get bigger, noting lower yield estimates in Iowa, Illinois and Nebraska.

Before we look at Thursday's new soybean estimates, I hope you had a chance to read Wednesday's article from DTN Farm Business Editor Katie Dehlinger, "Soybean Discounts Skyrocket..." (https://www.dtnpf.com/…)

Dehlinger describes the problems encountered by growers after heavy late-season rains caused widespread crop damage around Arkansas, Louisiana and Mississippi. With slow soybean movement out of New Orleans, and farmers having difficulty finding a home for their water-damaged soybeans, commercials have been offering to take the soybeans at deeper-than-normal discounts.

I mention the article because after this week, we know that concerns about soybean quality aren't limited to the southern states. Noting snow in the Dakotas and flooding throughout the central Midwest, DTN Contributing Analyst Elaine Kub asked the million-dollar question in Thursday's Before the Bell grain comments, "How much of this crop damage will manifest as a grading factor at the elevator door, and how much will result in outright yield losses when the soybeans fall to the ground?"

No one can answer that question just yet, and Thursday's World Agricultural Supply and Demand Estimates (WASDE) report was certainly not prepared for how quickly the issue has erupted. After months of anticipating a record soybean harvest, I now suspect we may not get a good soybean estimate until USDA releases its Dec. 1 Grain Stocks and WASDE reports in early January.

In that muddled context, USDA's new estimate of 885 mb of U.S. ending soybean stocks for 2018-19 is written in lighter pencil than usual for an October WASDE estimate. Even before this week, the ongoing trade dispute with China made assessing U.S. soybean demand difficult enough for 2018-19 and that has not changed.

As we head deeper into fall when trading in grains typically turns less volatile, we have combines waiting in sheds for drier fields. Thankfully, the forecast does look drier for much of the Midwest the next two weeks.

This week, however, we also saw Hurricane Michael wreck Florida's Panhandle and sudden selling hit the Dow Jones Industrials with a 5% loss the past two days as investors show increased concerns about rising interest rates. Thursday's higher closes in corn and soybeans showed relief that estimated supplies were not as large as many feared, but in this fall's markets, there is plenty of surrounding turmoil.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

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