October USDA Promises Big Crops, But Also Big Demand

Soybean harvest is progressing in Ontario.  Yields are especially high in my area.   I had one farmer drop-in today talking about the 80 bushel per acre mark flickering on his yield monitor many times.  I also heard of a 74 bushel per acre soybean yield in my neighborhood.  I don’t wear the 40-bushel badge on my forehead anymore.  However, I still don’t get yields like that.  Needless to say, I am looking at very close to record yields in my soybean fields this year.

It would seem that many of our American friends have the same good fortune.  This past week the USDA released its October crop report.  They pegged US soybean production at a record 4.269 billion bushels boosting US yield to 51.4 bushels per acre.  The USDA credited the increasing yield to higher pod counts in 11 major soybean-producing states.  Simply put, August rains really helped and record yields are expected in Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

I wasn’t too surprised by the soybean numbers coming out of the USDA because anybody who has been following market chatter has seen some big soybean yields being posted on social media.  I was expecting the soybean move by USDA raising their September estimate by 68 million bushels.  The USDA also raised the soybean 2016-17 ending stocks to 395 million bushels.  Maybe, after all, soybeans aren’t the great liars that I often say they are.

It makes me wonder because for years I’ve talked about corn’s agronomic superiority with regard to yield versus soybeans.  It seems that I could plant corn every year and expect greater productivity gains consistently over time versus soybeans, which always seemed to have disappointing or slower productivity gains.  Sometimes soybeans would look absolutely fabulous in the field, but come harvest time, yields would disappoint.  That’s where they got the reputation as the great liars.

So maybe that is changing to some extent now with our American friends busting through the 50 bushels per acre national mark.  Maybe some of the newer breakthroughs in soybean yield technology are actually boosting yield instead of more herbicide tolerance.  Maybe the growing season of 2016 is the start of some good things to come.

Of course the continuing good news for soybean farmers is the increasing demand currently pegged at 4.101 billion bushels in the United States.  This represents constant improvement and with Brazil soybeans drying up at their export ports, that is great news for a big American crop.  Maybe the soybean price will catch some wind in the next few weeks, especially after the American harvest is done and Brazilian planting ramps up.

The demand picture for corn is not quite as bright as soybeans but it is still very handsome.  US demand for corn now stands at 14.525 billion bushels.  Considering that the USDA actually decreased corn yield down to 173.4 bushels per acre giving us a corn crop of 15.057 billion bushels, a record by a mile.  These numbers are stratospheric to me.  Demand statistics that high cannot afford any type of black swan event or drought in North or South America in future years.  It is the bullish side of the general bearish situation.

In Ontario and Eastern Canada the Canadian dollar at $.75/76 US is still helping cash grain prices.  In fact, the price optics are a bit of a mirage, something that I talked about last week.  Corn continues on the import basis in Ontario, something we haven’t seen in quite some time.  The crop is compromised in many places and corn is moving in many directions.  Soybean yields have been so good in some areas, there actually storing beans on the ground.

Of course, we all want to know where price direction is going to go next.  Futures prices are something that I will leave to DTN Senior grain analyst Darin Newsom and Todd Hultman.  We have been in the sideways pattern for many months now in corn and soybeans and maybe the market action we’ve seen in the last couple of days will get us out of that.  In Ontario we are likely to see a continuing strong import corn basis into 2017.  Of course much of our price direction in soybeans and wheat has to do with where the Canadian dollar decides to go.

Clues to the future of grain prices may be seen in South America as planting season ramps up there.  We know that our South American friends have tremendous production potential.  We also know that both Brazil and Argentina have had their political problems.   Key will be to measure all of these market factors as we move ahead.  Daily market intelligence will remain a big part of any marketing plan