Market News

Muted reactions to USDA numbers

Soybeans were modestly lower on fund and technical selling. The USDA lowered its 2018 production estimate but is still expecting a record crop with a record average yield. However, these numbers are as of November 1st and don’t include recent damage or fully factor in quality issues, with more harvest delays expected. The USDA did lower the export outlook, sharply, because of China’s tariff on U.S. beans. President Trump and President Xi are expected to meet at the G20 summit in Argentina later this month. U.S. and world ending stocks are larger than expected, but it seems like the shock wore off fairly quickly. Still, the department reduced its outlook for Chinese imports because of the trade tensions but raised the export projection for Brazil. China’s General Administration of Customs says October imports were 6.92 million tons, up 5.85 million on the year. According to AgriCensus, Brazil’s biodiesel industry is requesting a 10% export tax on soybeans because the strong demand from China is harming domestic crush margins. CONAB says harvested area in Brazil could end up being 0.6% to 2.8% higher than a year ago. Conditions look good for South America, with an El Nino pattern expected to start later this year. Soybean meal and oil were lower, following beans.

Corn was modestly higher on short covering and technical buying. The USDA also lowered its outlook for corn, but still expects the second largest crop ever with a record yield, as the trade’s eyes return to harvest conditions. The U.S. ending stocks estimate was down on the month with that lower crop projection cancelling out reduced feed and export expectations. The USDA also raised world ending stocks sharply because of data from China, but that ran its course, as China isn’t a big exporter of corn. Ethanol futures were lower. The USDA maintained its record corn for ethanol use projection ahead of the implementation of year-round E15 use. The trade is also monitoring discussions on the USMCA, the Trump administration’s version of NAFTA. CONAB expects harvested area for Brazil’s first corn crop to be up 0.5% to 3.5%.

The wheat complex was lower on fund and technical selling. U.S. wheat ending stocks were down on the month and while world ending stocks were up from October and larger than expected. The fundamental outlook remains bearish, with the next ending stocks projection, marking the mid-point of the 2018/19 marketing year for wheat, out December 10th. The trade continues to watch U.S. winter wheat planting, expecting more delays, along with global crop conditions, expecting more downward revisions for Australia’s crop and Russian exports. Japan bought 60,728 tons of U.S. food wheat, along with 60,760 tons from Canada. CONAB pegs Brazil’s wheat crop at 5.5 million tons, up 29.8% on the year. Weekly U.S. exports topped expectations for the third week in a row, but physical shipments remain relatively slow.