USDA Grain Reports Review

Soybeans, Corn Soar on Lower-Than-Expected Stocks

Dana Mantini
By  Dana Mantini , Senior Market Analyst
The chart above shows November soybeans reacting early to the lower than expected stocks in Sept. 30's USDA report and the revision lower in the U.S. 2018 soybean production. November appears to be breaking out of a bull flag chart pattern. (DTN ProphetX chart by Dana Mantini)

USDA's Sept. 1 Grain Stocks and Small Grain Summary reports turned out to be a big surprise relative to expectations on both corn and soybeans. Corn ending stocks on Sept. 1 were a much lower than expected 2.11 billion bushels (bb) compared to the average trade guess of 2.428 bb and last year's 2.140 bb. Soybean stocks at 911 million bushels (mb) were under the average trade estimate of 982 mb, but 108% higher than last year's 438 mb. Wheat stocks were a greater than expected 2.38 bb compared to the average estimate of 2.318 bb.

As for the Monday markets, December corn futures finished 16 1/2 cents higher at $3.88, November soybean futures rose 23 cents to $9.06, Chicago December wheat was 8 1/2 higher at $4.95 3.4, Kansas City December was up 7 1/2 cents at $4.15 and Minneapolis December closed 3 1/4 lower at $5.43 3/4.

Let's take a deeper look at some of the changes in the USDA stocks and small grains summary reports.

CORN

As stated above, U.S. stocks of corn were a much lower than expected 2.11 bb -- 318 mb below the average trade estimate of 2.428 bb and 30 mb below last year's ending stocks of 2.140 bb. This is the largest implied disappearance in quite some time in the fourth quarter. Disappearance in the June through August quarter was much greater than expected at 3.09 bb, compared to last year at 3.16 bb. Feed and residual usage was likely much higher than the trade had expected and figures to be close to 1.040 bb.

On-farm corn stocks, at 753 mb, were up 22% versus last year, while off-farm stocks of 1.36 bb were down 10% versus a year ago.

With managed funds coming into Monday short an estimated 185,000 to 190,000 contracts, corn futures reacted with a sharp rally to the upside, as funds were forced to cover.

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SOYBEANS

Soybean September stocks of 913 mb are up 108% from last year's 438 mb, but well under the average trade estimate of 982 mb. Indicated disappearance of 870 mb is up 11% versus last year.

On-farm soybean stocks were revealed to be 265 mb, and that is up 162% from last year, while off-farm soy stocks of 648 mb are also up 92% from a year ago.

The 2018 soybean crop was also revised down by 116 mb to 4.428 bb. Planted and harvested acreage was revised to 89.2 million acres (down 300,000 acres) and 87.6 ma (down 400,000 acres), respectively, with yield revised downward by 1 bushel per acre (bpa) to 50.6 bpa.

With managed funds coming into Monday's report net short over 110,000 contracts of soybeans and soybean meal combined, the reaction has been a sharp rally into major resistance. November soybeans appear to be breaking out of a bull flag chart pattern, which could signal a run toward $9.20 to $9.30.

Also fueling Monday's soybean rally are rampant rumors (so far unconfirmed) that China bought more U.S. soybeans without tariffs ahead of their 70th anniversary holiday celebration.

WHEAT

Wheat stocks on Sept. 1 were pegged at 2.38 bb, and that compares to the average trade estimate of 2.318 bb, and 2.390 bb last year. On-farm wheat stocks are pegged at 776 mb -- up 23% from last year, while off-farm stocks of 1.61 bb are down 8%. June through August 4 quarter disappearance of 657 mb was up 1% versus last year -- likely partly attributable to wheat feeding.

All-wheat production of 1.962 bb compares to 1.980 bb in August and a revised 1.89 bb in 2018-19 -- up 4%. Wheat yield was pegged at 51.6 bpa -- up 4 bpa versus a year ago. Winter wheat production was pegged at 1.304 bb -- up 10%, but below the 1.327 bb estimated. Soft red winter wheat, at just 239 mb, was well below expectations and August's number of 257 mb. Hard red winter wheat was at 833 mb and white winter wheat at 232 mb.

Other spring wheat was at 600 mb, which compares to 623 mb last year -- down 4%. Other spring wheat was estimated before the report at 585 mb, but there will likely be adjustments in future reports, as spring wheat harvest is not yet complete.

Chicago wheat reacted with strong gains on the tighter soft red supplies, as did Kansas City wheat, but Minneapolis ended up 3 1/4 cents lower, as production was higher than expected. One thing to keep in mind is that as of last Sunday, there was still 13% of the spring wheat harvest still in fields, and revisions are likely down the road.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana Mantini on Twitter @mantini_r

(BE/CZ)

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Dana Mantini