The September USDA Supply and Demand Estimate/Crop Production numbers caught the markets by surprise on Tuesday. Joe Vaclavik, President of Standard Grain in Chicago, said the corn and soybean numbers were the biggest surprise…
“Both of which went up from USDA’s August forecast. That was not expected, I think the vast majority of the trade had expected smaller yield numbers versus August, so this is the second month in a row now that the government has surprised us with some bigger numbers.
“In the grander scheme of things we’re left with a supply and demand scenario that’s pretty burdensome at face value limits the upside potential in that market.
“Soybean market I think is a little bit more interesting, we’ve got still a burdensome supply and demand scenario, but demand has been very, very strong.”
The weaker U.S. dollar, along with soybean crush, has helped the soybean market as well. Vaclavik said this is typically a time of year when the markets push lower ahead of harvest. The biggest challenge commodity prices are facing is a lot of old crop carryout from last year’s harvest…
“Oh, yes, I believe there is still a lot of farmer-owned old crop corn in bins across the country. Some people carry it into the next marketing year, some already have. So, I think that’s a problem, in the corn, you have a big, big ending stock number, after that 16-17 marketing year, and that corn is sitting on farms, it’s sitting in commercial facilities. Yeah, it’s a problem, and that’s part of the reason why the corn market is so weak, it’s not only the fact that we have a big, or trendline, at least, crop headed our way this harvest, it’s the fact that we have an enormous carry out from last year. Two very, very negative factors.”
He says USDA didn’t necessarily find a lot more harvestable acres…
“I know that there was a footnote in the report that these numbers were compiled before the hurricanes, and that there will be an adjustment made next month to reflect that. It may be more relevant in the cotton market, and the rice market, there may have been some soybean acres or corn acres affected, I think that’s pretty minimal.
“But the USDA report did say as kind of a foot note, ‘any hurricane-related affect was not reflected in this report, but will be reflected in the next couple of reports.’”
Joe Vaclavik of Standard Grain in Chicago.