Quarterly stocks numbers, harvest progress and trade developments have dominated much of the market conversation.
After what appeared to be a move by China to find the good graces of their global trade partners, a much different attitude emerged. Leaders announced they would not come to the U.S. for trade talks until after the midterm elections, claiming the increase in pressure out of Washington was behind the decision. This was seen as an incredible blow to the administration as many outside observers feel some rural voters could have their votes decided by a trade solution or lack thereof.
In addition to the announcement, the Chinese government purchased a large ad which ran in the Des Moines Register. The ad claimed the Trump administration was “selling out farmers” and causing great economic harm in the Farm Belt. In response, the Trump administration claimed this was meddling in the upcoming election, stating it would not go unpunished.
We did see what appears to be cordial trade discussions beginning with our Japanese counterparts. While the Japanese government was quick to say the U.S. would not receive any better treatment than their Trans-Pacific Partnership allies, many industry groups welcome the open discussion with the idea that any additional access to the Japanese market is a bonus.
In other news, the U.S. Department of Agriculture released their updated quarterly stocks figures. These numbers hold greater importance for corn and soybeans because they will be used as final old crop ending stocks numbers, giving us an indication as to whether or not USDA supply and demand estimates put together each month have been accurate.
Based on those numbers, the USDA had overestimated feed demand throughout the year as corn ending stocks came in 130 million bushels higher than traders had anticipated ahead of the report. Of these numbers, it is interesting to note that while on farm and commercial stocks are lower than a year ago, the amount of movement off farm is greater than one would anticipate. This would help to explain some of the basis trouble seen through the Corn Belt in the month of September.
The USDA also came in higher than expected when it came to soybean carryout. Since we have a pretty good idea of soybean usage throughout the year, thanks to export sales figures released weekly and crush numbers released each month, the USDA actually increased last year’s production by 19 million bushels. They credited a drop in residual usage as the secondary reason for the 42 million bushel increase over initial September carryout figures.
It is interesting to note that while stocks increased across the board when it comes to soybeans, the U.S. farmer is holding a significant amount of beans as we work our way into harvest.
Wheat numbers came in slightly higher than expected, as well, as production was raised slightly. Overall, the increase in stocks figures will result in an increase in old crop carryover and subsequent new crop carry-in for both corn and beans. Without an equal or larger increase in new crop demand or reduction in production estimates, new crop carryout will increase in the October World Agricultural Supply and Demand Estimates.
Harvest pace is ahead of the five-year average by 5 percent for corn and 6 percent for beans, with some areas looking to wrap up while others are still waiting to get started. We are getting a better picture when it comes to yields; at this point, it appears beans are as good if not better than the latest USDA expectations, while corn reports are solid, but more so in line with last year’s production vs. the large increase currently expected by the USDA.
Cash markets, specifically basis moves, will likely be a better indicator of what is actually taking place across the countryside than anything these next few weeks.
Angie Setzer is vice president of grain at Citizens Elevator. She can be reached at firstname.lastname@example.org.