Monday's USDA crop condition report put corn at 52% in good to excellent condition, up 1% from the week prior and that is a yearly low. This small up-tick came on slightly higher ratings in Nebraska, Iowa, Michigan and Wisconsin, offsetting lower numbers in Illinois, Indiana, Ohio and Missouri. Now that harvest is underway, the minor change is fairly meaningless.
The acreage harvested at this time is 15%. The year-ago number was 26% and the 10-year average is 16%. Harvest yield results (better than or worse than expected) range somewhat widely due to the weather conditions. However, the condition reports are no longer a factor in pricing.
Traders await the October 12 USDA crop report for that overall harvest-to-date opinion on yields.
Soybeans came in at 53% good to excellent, unchanged on the week, versus 63% a year ago. Harvest is underway at 5% complete.
Winter wheat planting progress got the most attention with 26% of this year's crop planted versus the 10-year average of 35%. Drought-stricken Texas came in at 14% seeded versus the 10-year average of 34% and Oklahoma was 1% versus 31%. These states look to continue dry and warmer than normal the next two weeks and that will stymie planting. No one will panic until after October 10.
The week started as we had anticipated with December corn hitting a low of $6.30, November beans at $12.26 and December wheat $6.24 before short covering and light buying entered on early-week positioning ahead of Friday's 7:30 a.m. (Central time) small grains and quarterly stocks reports.
Pre-report estimates for stocks widely vary. Corn stocks on hand as of September 1 get an average estimate of 942 million bushels vs. the year-ago level of 1.708 billion bushels. The 750-million-bushel range is important as it will give us a look at what ending stocks on the USDA October 12 monthly crop report will say.
Current price strength comes from shrinking ending inventories. There's some fear that recent cuts in the last two monthly crop reports for feed and ethanol usage could lead to a higher stocks number. It's been the government's game to erase a bullish slant on declining production by erasing usage.
The average estimate for soybean stocks on hand is 224 million bushels, with a range of 202 to 250. The fear for a bearish report comes on thinking the government will address slower demand in June, July and August. Quarterly stocks predicting is tricky. If they are on the high end of estimates, a measurable break will occur as it will also suggest a bearish October report carryover estimate.
This report is more about the wheat market and the production numbers. All the pre-report trade estimate averages are below previous estimates for all wheat varieties except soft red winter wheat (projected up 2 million bushels.) Durham wheat estimate is down 4 million, spring wheat is down 35 million, hard red winter wheat is off 3 million and all wheat combined: down 37 million.
If the average numbers are hit, we open higher but no rally beyond the initial reaction. But there is room for a bullish surprise if the USDA comes closer to a earlier month agency report suggesting that 3 million spring wheat acres were flooded out. Not a reliable report to trade and the recent government shell game on crop condition and usage report lead me to say that if you are long and have profits prior the report, take them or put tight stops in.
December corn resistance this trading session (Wednesday) lies at $6.60. If prices close above it, $6.90 is next.
November bean resistance is $12.80; a close over and $13.20 is next.
December wheat resistance lies at $7.00 with support at 625.
There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.