The first World Agricultural Supply and Demand Estimates report in two months did little to ease the bearish sentiment in grain markets.
The U.S. Department of Agriculture is estimating a 13.99 billion bushel U.S. corn crop and 1.89 billion bu. of ending stocks. Both numbers were slightly below trade expectations.
“Corn stocks did not meet the average guess, but these are still very burdensome supplies,” said Rich Nelson, chief strategist with Allendale Inc.
World ending stocks were even more bearish, rising to 164 million tonnes from the USDA’s September estimate of 151 million tonnes.
Read Also
U.S. livestock: Cattle futures sink on concerns over Trump’s push to lower prices
Chicago | Reuters – U.S. cattle futures tumbled on Monday, extending a steep slide after President Donald Trump complained last…
Nelson envisions a corn futures price of $3.90 based on 1.89 billion bu. of U.S. ending stocks.
“I don’t in any way call (today’s price) a harvest low,” he said.
Dan Basse, president of AgResource Company, said it’s stunning that farmers in Illinois were able to achieve record yields of 180 bu. per acre given the adverse weather they endured in 2013.
He believes the U.S. corn and wheat crops are only going to get bigger in future reports.
Basse said the corn market experienced a “relief rally” in the wake of the report because traders were happy the crop wasn’t any bigger. He believes $4.15 is as cheap as corn will get for now but it probably won’t rise above $4.40.
The long-term price outlook is grim as markets shift their attention to Latin America unless there is a huge weather scare in the southern hemisphere.
“We’ll see corn prices drop towards $3, soybean prices drop under $9 and wheat prices probably closer to $5.50,” he said.
Basse advised farmers to sell “early and often” before that happens.
The USDA’s soybean estimate of 3.26 billion bu. was 33 million bu. above trade expectations. But the USDA increased its export estimate by 80 million bu. and the U.S. crush by 30 million bu.
“I wouldn’t call it bullish in any way,” said Nelson.
“I would call it neutral, which is a shift in mindset from straight bearish.”
He expects nearby soybean futures to be in the $12.50 to $13 range.
If there was any surprise in the report, it was in the wheat number. The moderate 16 million bu. increase in U.S. production was expected.
“The surprise here was they didn’t touch exports. The trade was looking for a good 50 million bu. increase in exports,” said Nelson.
That’s because the U.S. is already 70 percent sold on its USDA export target already compared to the five-year average of 63 percent sold.
