November soybeans erased all of Monday and Tuesday's losses after the USDA report cut the US average soybean yield to 35.3 bushels per acres vs. the August estimate of 36.1 and against traded expectations of 35.79. Production was also slashed by 59 million bushels while and 72 million bushels was cut from total demand. The 2012/13 carry-in was lowered by 15 million bushels due to last year's impressive export pace which in the end, left this marketing years carryout unchanged at 115 million bushels, a 9 year low.
The USDA managed to cut crush by 15 million bushels and exports by 55 million bushels. Theses revisions are down 12% and 22% from 2011/12 respectively. The current export sales pace was already 60% of the USDA estimate for the 2012/13 marketing year using the prior export forecast of 1.110 million bushels. The decline of 55 million bushels in exports means the US has now already sold 63% of the revised export estimate for 2012/13 and according to the USDA, we are only 4% harvested. The 4 week average for export sales is 690,000 tonnes per week which would also mean the US only needs to sell 203,000 tonnes of soybeans per week to reach the USDA estimate. The trade believes this morning's sales should fall near 700,000 tonnes or 500,000 tonnes more than sales actually needed. Current sales are grossly outperforming the 5 year average of 35% which means the USDA will need to increase the export forecast in October or prices will need to move remarkably higher in order to slow down demand.
Harvest weather looks ideal this week with dry conditions in the eastern Corn Belt and Southeast to finish the week and into the weekend. Scattered and light showers may develop in the central Midwest through the weekend but accumulation is expected to be light. Storms are rolling across the western Corn Belt as we speak and are tracking as far north as Wisconsin. The weather forecast for central and northern Brazil continues to be dry and the outlook offers limited relief in the next 10-14 days. A shift in weather will be needed in the next couple of weeks so that planting can begin without risk of yield loss.
Soybean spot basis dropped 15-20 cents per bushel at a processor in Indiana yesterday after futures surged and harvest advanced across the Midwest. Decatur, IL is posting 40 cents over the November contract while Des Moines, is paying 30 cents under the November contract. The surge in prices along with good harvest progress should keep pressure on cash basis as farmer sales advance.
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