September grain stocks shock trade

September grain stocks shock trade

USDA's final pre-shutdown grain report was a big one, giving market a bearish surprise of millions of bushels more corn and soybeans.

AS has been the case more than once in the past year, the U.S. Department of Agriculture shocked the grain markets Sept. 30 with the release of a "Quarterly Grain Stocks" report that showed significantly more corn in storage than the trade had anticipated.

USDA's September stocks estimate is important because it coincides with the end of the old-crop marketing year.

According to private analytical firm Allendale, a larger September corn stocks figure was a surprise — but not totally unexpected.

"The trade was already thinking that USDA's demand estimates for the year were too high," Allendale wrote in an analysis. "To be honest, no matter what USDA told us on this report, it would not matter too much as we have such a massive supply increase from the current harvest."

Even so, the 824 million bu. of corn that USDA reported came in well above the 681 million analysts had predicted (Table). Allendale said the magnitude of the increase was what made for such a bearish surprise.

Although the stocks figure was larger than expected, it still represented a 17% decline in stocks from last year's inventory.

Demand, however, is the bigger concern for the market at this point as the National Agricultural Statistics Service (NASS) reported that corn disappearance during the quarter was down more than 10% from the same period last year, at 1.94 billion bu.

Rice Dairy market analyst Jerry Gidel said the disappearance figure likely reflected a 148 million bu. drop in feed demand, if, indeed, the entire increase in stocks came as a result of smaller feedlot inventories and a move to cheaper feed wheat.

Traders will eagerly await the October "Crop Production" and "World Agricultural Supply & Demand Estimates" reports because those will provide some additional information as to feed demand, as well as an expected update to USDA's harvested acreage figure. With the ongoing government shutdown seemingly apt to linger for another week, however, those reports will most likely be delayed.

NASS crops chief Lance Honig said Sept. 30 that his team had continued to gather data for the crop reports up until the shutdown, but how much of those data could be analyzed in time for the scheduled Oct. 11 report releases will be a function of how soon the government gets back to work. It seems less and less likely that an Oct. 11 release date will actually occur.

Soybean stocks as of Sept. 1, at 141 million bu., came in above expectations as well, while traders had expected USDA to hold firm with its previous estimate of 125 million — a figure that it kept on the books for most of the summer.

"We had been looking for a decline in old-crop stocks, a decline in new-crop production in the October report and the chance at a rally in the next two months as the U.S. is the only soybean supply in town," Allendale said last Monday. "This report has eliminated the chance of a rally to $14(/bu.). It suggests $12.50 for a November soybean target in the short term."

Commodity brokerage FCStone said Oct. 1 it expected 2013 soybean production to hit 3.163 billion bu., an increase from its previous projection based on a slightly better national average yield of 41.4 bu. per acre. USDA's current estimate is for 3.149 billion bu. based on an average yield of 41.2 bu. per acre.


Market recap

Prices fell sharply after the quarterly stocks surprise, but volume dropped significantly in the latter half of the week as uncertainty over the government shutdown kept traders on the sidelines.

Corn prices hit their lowest point in more than three years following the report, dropping nearly 3% to $4.415/bu. for the December contract. The last time it traded at that price was Aug. 31, 2010.

Corn prices traded as low as $4.35/bu. last Wednesday but seemed fairly tied to a narrow range of around $4.40 for the rest of the week.

While total volume in the corn pit more than doubled Sept. 30 to 320,558 contracts, it fell 23% Tuesday, 29% Wednesday and 15% Thursday to just 148,475 contracts — as traders were wary of flying blind without the typical data from USDA and the Commodity Futures Trading Commission.

Soybean prices fell nearly 3% last Monday as well, dropping to $12.83/bu. following the bearish stocks report. Volume jumped 82% on the day to 261,897 contracts, with signs of heavy fund liquidation, according to Farm Futures senior editor Bryce Knorr.

Volume in the soybean pit slipped 21% last Tuesday, gained 5% Wednesday and fell 9% on Thursday.

Traders have many more questions about a historically tight soybean supply than they appear to have about corn, with the prospect of a delayed harvest leading some to assume that there is still some downside yield potential, depending on the date of the first frost relative to crop maturity.

Barring a congressional miracle on the budget issue, USDA will not likely release its weekly "Crop Progress" report as scheduled Oct. 7, keeping the market guessing as to harvest progress.

As of Sept. 30, just 11% of the soybean crop was harvested, even though crop condition ratings actually improved compared with the previous week's report.

Corn harvest as of the final day of September was just 12% completed, according to the USDA report.


U.S. grain stocks as of Sept. 1, million bu.



Avg. trade



USDA Sept.





June 1 est.

2012 est.



















Sources: USDA, Reuters.


Volume:85 Issue:41

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