USDA issued the monthly supply/demand report today. The October report is seen as an important report. USDA incorporates the finalized old crop stock numbers for corn and soybeans that were reported on the 9/29 Grain Stocks report. They are also active with changes for new crop yields. These estimates were made from 7,800 producer surveys as well as the second month of in-field objective analysis. This report is seen as the last real supply change until the January Annual Production Summary. For wheat, USDA incorporates the revised production reported on the 9/29 Small Grains Summary.
Corn: Old crop ending stocks were lowered from the September estimate of 1.452 billion to 1.361. That was fully expected from the recent Grain Stocks report. For new crop USDA lowered production lightly, from 15.134 billion to 15.064. The trade expected 15.101 (ALDL 15.068). There were no changes to acreage on this report. Yields were lowered from 173.8 bpa to 173.0. The trade expectation was 173.5 (ALDL 173.0). Between lowered beginning stocks and production USDA’s total supply estimate was lowered by 160 million bushels. There were only mild demand changes as offsets. Feed/residual was lowered by 25. USDA chose to leave corn for ethanol unchanged on this report. The early start to this year’s ethanol production has shown no seasonal downtime from planned maintenance. It is running 11% over last year. Though that pace will not last as we get into the normal production schedules in the weeks ahead, we are currently over USDA’s view for the year of a 2% increase. Exports were lowered by 25. There is likely a minor decrease still ahead in the future. USDA’s current whole-year goal is -6% from the five year average. To hit that goal the remainder of the year needs to see sales 3% over average. Three of the four weeks of sales in September were below that amount. Ending stocks were lowered from 2.221 billion to 2.111 on today’s report. The trade estimate was 2.138 (ALDL 2.149). Though stocks were below the trade estimate we cannot call this positive. Anything over 1.8 billion bushels suggests economic value under 410 for futures. Until rains show over Argentina’s drought areas corn will likely remain over this value estimate.
The world balance sheet showed a minor decline in stocks, from 314.0 million tonnes to 312.4. One surprise to many would be USDA’s decision to increase the coming Argentine crop from 54 mt to 55. This further increases the distance from the drought damaged 2023 crop of 34. This increase would be a surprise to many considering the summer drought that is still in place. The Brazilian 129 mt crop estimate was left unchanged from last month. That is a moderate decrease from the 137 crop from 2023. Conab is lower than USDA at 119.4. No changes were made to the estimates for China. Production was left at 277 mt. This morning China’s own supply/demand report raised that to 288.
2023/24: Old crop stocks were raised from last month’s 250 million bushel estimate to 268. That was expected given the recent Grain Stocks report. New crop production was lowered from last month’s 4.146 billion to 4.104. The trade estimate was 4.134 (ALDL 4.105). Yields were lowered from 50.1 bpa to 49.6. The trade estimate was 49.9 (ALDL 49.6). The net change was a 23 million increase for total supply. Part of this was offset by a 10 million bushel change to domestic crush. USDA’s 2.300 billion estimate for the year is a 4% increase from old crop. Residual use was also raised by 2. The hot button issue for soybeans is exports. On this report USDA recognized 45 million bushels of concern. Their current 1.755 billion estimate is 11% below the five year average sale. This lowered expectation may still be too high. It would require remaining sales through August 1% over average. Export sales in September were 68% below average. Brazil has a clear pricing advantage for both short term and coming orders. The Mississippi River is forecast to fall to levels quite near the lowest level from 2012. We expect another 50 million bushel decline in the months ahead. Today’s report appears supportive as USDA left ending stocks unchanged from last month at 220. The trade expected 233 (ALDL 248). A 220 stock would allow futures to theoretically push to 1360. A 250 stock implies 1295. A 300 stock implies 1220. Given the widespread belief that exports will decline in the future we don’t expect futures to see 1360. With our view of another 50 million bushel cut in the months ahead, and stocks likely to see 270, a price of 1270 would be a reasonable downside target much longer down the road.
World soybean stocks were lowered on this report from 119.3 million tonnes to 115.6. On this report USDA left their 48 mt and 163 mt production estimates for Argentina and Brazil unchanged. Combined, this is 30 mt over last year. They left China’s production and import estimates unchanged. A 1 mt increase was noted for domestic crush.
2023/24: Based on the recent Grain Stocks report the old crop May 31 stock estimate was lightly increased from 580 to 582 million bushels. Production was raised from 1.734 billion to 1.812. This was known from the recent Small Grains Summary. Along with a 5 million increase for imports these changes added 85 million to total supply. This was partially offset by a 30 million increase for feed/residual and a 5 million increase for seed. Ending stocks were raised from 615 million to 670. The trade estimate was 647 (ALDL 657). Given that US wheat prices are determined by the trade’s confidence over Ukraine and Russian exports and monetary policy we expect no price changes from this report.
The world ending stock estimate was lowered from 258.6 million tonnes to 258.1. The trade’s focus for this report would be on declines for Argentina and Australia and an increase for Russia. USDA’s only change on this report was a decline for Australia from 26.0 mt to 24.5.