The latest United States Department of Agriculture (USDA) reports surprised traders leading to an immediate sell-off for Chicago Board of Trade (CBOT) soybean contracts.
“It’s a pretty interesting report to tell you the truth, but really the focus has been on the beans,” said Jack Scoville of Price Futures Group in Chicago, Ill.
It had been expected that U.S. soybean yields and production would be lowered, while ending stocks would be increased. However, the Nov. 8 reports still managed to throw a curveball into the market by changing the soybean export demand number.
Export estimates for U.S. soybeans were lowered to 1.9 billion, down 160 million bushels. This was due primarily to there being less expected exports to China.
CBOT soybean contracts dropped around 10 to 15 cents almost instantaneously after the reports were released. However, by the end of the day contracts had recovered from the shock, with the January contract closing at US$8.79 per bushel, down less than a cent.
The U.S. soybean yield for the 2018/19 crop year was lowered to 52.1 bushels per acre and production lowered to 4.6 billion bushels. Despite the cuts, both will still be records. Ending stocks rose to 955 million bushels.
“It’s a negative report for beans. There’s no doubt about it and it’s going to keep us under a little bit of pressure here for a while. But I think we’ll see some constructive demand down here,” Scoville said.
With the latest numbers there will be even more attention paid to the G20 summit at the end of month in Argentina, where U.S. President Donald Trump is set to meet with Chinese President Xi Jinping.
“I don’t know if there’s going to be more pressure on our boy or not here to cut a deal. Will probably make the Chinese feel a little bit better that they can get a little bit better deal for themselves,” Scoville said.
The USDA reports for corn were mostly in-line with what expectations had been. U.S. corn production was lowered to 14.626 billion bushels and the yield lowered to 178.9 bushels per acre. Corn ending stocks also saw a decrease to 1.736 billion bushels.
Immediately after the report release CBOT corn contracts were quiet, not showing much of a reaction. However, some of the sell-off in soybeans did transfer over into corn contracts pressuring them lower. The corn market did recover though, with the December contract closing at US$3.74 per bushel, up just over a cent.