GRAIN MARKETS: Soybeans gain on lower yield expectations

The next USDA yield estimates will go down again, according to trade.

November 7, 2017

6 Min Read
GRAIN MARKETS: Soybeans gain on lower yield expectations
Stock market background designCredit: FeelPic/iStock/Thinkstock

By Ben Potter

Soybeans found support in Monday’s session after industry analysts predict the next USDA crop yield reports, due out Thursday, will have soybean yields slipping for a second straight month. Meantime, corn yield estimates could rise again in those same agency reports, but losses were mostly stopped after a round of technical buying and short-covering shored up prices. Wheat prices were also buoyed by short-covering and ended up higher on the day.

For Tuesday, the upper Midwest and Plains remain brisk, with daytime highs failing to get out of the 30s or even 20s in some areas. The lower Midwest, meantime, should see closer cooler-than-normal temperatures in many areas, with daytime highs mostly reaching the upper 40s and 50s. The best chances for precipitation Tuesday are in the Central Plains and Mid-South. Next week, in contrast, NOAA is predicting a mostly drier, warmer week.

In Washington, D.C., the tax bill, which could represent the largest changes to the U.S. tax code since the 1980s, is undergoing a round of negotiations and revisions to help rally the support it would need to pass. The Senate is also working on its own version of the bill, which would need to be reconciled with the House version before it can be signed by President Trump into law.

The Dow enters a third consecutive day of slow gains, adding 12 points in midmorning trading to 23,461 points. Energy prices continue to rise, led by crude oil, on lower U.S. production and a Saudi Arabia crackdown on corruption. Gold and copper were also higher in midmorning trading.

Corn prices grabbed gains early thanks to short-covering, but trade expectations for even higher U.S. yields pushed prices just back into the red to end the day. December futures slipped just 0.25 cents to close at $3.48, while March 2018 futures dropped 0.5 cents to close at $3.6150.

Ahead of the November 9 updates to the USDA World Agricultural Supply and Demand Estimates (WASDE) reports, trade analysts are expecting another bump in corn yield estimates. In October, USDA had raised its U.S. corn estimates from 169.9 bpa to 171.8 bpa. A group of 30 trade analysts have estimated that number could rise again on Nov. 9, to 172.4. That would move total U.S. corn production in 2017 from 14.280 billion bushels to 13.327 billion bushels.

USDA also estimates U.S. corn, soybean and wheat inventories in its monthly WASDE report. In October, 2017/18 corn reserves were estimated at 2.340 billion bushels. Trade analysts expect that number to go higher, to 2.361 billion bushels. Trade estimates ranged between 2.212 billion bushels and 2.480 billion bushels. The group of trade analysts estimated 2017/18 global reserves at 7.9130 billion bushels, which is in line with USDA’s October estimates. 

Did the U.S. corn harvest make significant headway this past week? A group of eight analysts estimate corn harvest is now 69% complete, up from 54% a week ago. That would still put the 2017 harvest substantially behind a year ago, when harvest was 86% complete. USDA’s weekly crop progress report comes out later Monday afternoon.

Weekly export inspections for corn totaled 17.5 million bushels, down from a week ago (21.6 million bushels), and below the average trade estimate of 19 million to 27 million bushels. Now, the rate needed meet USDA’s forecast sits at 37.1 million bushels per week. Total export inspections for the 2017/18 marketing year, which began September 1, are still nearly half the volume of this time a year ago (218 million bushels vs. 401 million bushels). 

For the third straight business day, private exporters reported a large sale to USDA of at least 100,000 tons (3.8 to 3.9 million bushels, depending on crop). Monday’s export sales notice was for 5.1 million bushels of corn for delivery to unknown destinations for delivery during the 2017/18 marketing year, which began September 1.

Preliminary volume estimates were for 191,054 contracts, down big from Friday’s total of 362,360.

Soybean prices firmed on expectations USDA will cut yield forecasts in its Thurday WASDE reports. Strong export numbers also supported the lift. November futures were up 7 cents to close at $9.84, and January 2018 futures were 7.25 cents higher to close at $9.94.

Trade analysts are expecting USDA to revise corn yields higher on the Nov. 9 WASDE report, but for soybeans, they are expecting a slightly smaller crop. In the October WASDE report, USDA had lowered soybean yield expectations from 49.9 bpa to 49.5 bpa. Analysts expect another downward revision to 49.3 bpa. That would bring total U.S. soybean production in 2017 from 4.340 billion bushels to 4.414 billion bushels. 

Analysts also estimate the Nov. 9 WASE report will show 2017/18 U.S. soybean reserves at 425 million bushels – down slightly from USDA’s October estimates of 430 million bushels. Trade estimates ranged from 340 million bushels to 545 million bushels. The group of analysts also estimate soybean world reserves at 3.5090 billion bushels, down slightly from USDA’s October estimates of 3.5311 billion bushels.

The U.S. soybean harvest is now 91% complete, according to a group of eight industry analysts. That’s in line with 2016’s pace of harvest, which was 93% complete by this time. Last week, USDA estimated 83% of the U.S. soybean harvest was in the books. 

Soybeans export inspections continue to perform as expected, totaling 91.5 million bushels for the week ending November 2. That was slightly below last week’s total of 92.9 million bushels, but in line with the average trade guess, which ranged between 84 million bushels and 102 million bushels. The weekly drop from 2016 was insubstantial, but for the 2017/18 marketing year so far (which began September 1), export inspections are about 10% lower than this time a year ago.

Brazilian farmers have now sold an estimated 19.1% of their soybean crop, compared to 25% from a year ago. Planting pace still lags in some areas, including the Center-West region, where planting was 43% complete. The region has been playing catch-up this past week, but progress is still behind the 53% pace set a year prior.

Preliminary volume estimates were for just 115,003 contracts, down steeply from Friday’s total of 197,628.

Wheat prices caught a break Monday after a round of bargain buying and short-covering propped up prices by about 1%. December Chicago SRW prices finished another 5 cents higher to close at $4.3075, and December Kansas City HRW futures went up 3 cents to close at $4.2975. December MGEX Spring Wheat prices were up 6.25 cents to close at $6.3075. 

Analysts estimate the Nov. 9 WASE report will show 2017/18 U.S. wheat reserves at 956 million bushels – down slightly from USDA’s October estimates of 960 million bushels. Trade estimates ranged from 934 million bushels to 987 million bushels. World reserves are estimated at 9.8326 billion bushels by trade analysts, which is slightly lower than USDA’s October estimate of 9.8509 billion bushels. 

According to a group of eight industry analysts, the 2017/18 winter wheat crop is rated 53% good to excellent, up slightly from a week ago at 52%. Last year’s crop at this time had a 58% G/E rating, according to USDA.

Weekly export inspections for wheat landed on the low end of trade estimates, at 10.4 million bushels. The average trade guess ranged between 9 million and 16 million bushels. That keeps wheat below the rate needed to meet USDA’s forecast, which is now 18.5 million bushels per week. It also keeps the 2017/18 marketing year (which began June 1) slightly behind the pace of 2016/17, with 420 million bushels vs. 447 million bushels total.

Bangladesh wheat imports rose almost 30% from July to October, at 77.2 million bushels. The country has been importing substantial amounts of wheat and rice this summer and fall after significant flood damage hit domestic crops.

Preliminary volume estimates were for 114,505 CBOT contracts, down moderately from Friday’s total of 131,077.


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