Special Market Update
Grain Market Commentary
Monday, September 11, 2017
By Mark Rossol, Commodity Merchant, The Andersons
Tomorrow the USDA provides us with another chance to argue about their new crop production numbers in corn and beans. The average analyst estimate for corn yield is 167.9 vs the Aug USDA of 169.5 and soybean yield estimate of 48.7 vs 49.4 in August. Corn prices are about 20c cheaper than they were before the August report while beans are about the same. This is more indicative of the global demand picture than a couple of point variance in USDA vs Analyst estimates.
In corn, we see robust global supply and demand not aggressive enough to warrant higher prices. South African corn is the cheapest going to China today after their very strong crop, and South America is a close second with US down the list. Global demand in corn is not strong enough to overcome the glut we have today.
Beans on the other hand continue to see demand increases year over year that continues to challenge global production. We had two very good crops in a row from last year’s US crop and the most recent South American crop, but demand continues to outpace supply. A cool and dry August is throwing the analysts for a loop on how to estimate US bean yield which is adding to the uncertainty and volatility in prices we have seen recently.
This type of environment tends to lull people to sleep as the market grinds sideways for extended periods of time, but then is frequented by strong moves in either direction. I think setting floors in production and utilizing open orders is the best way to manage these environments from a producer perspective. The end user should not get too complacent with cheap prices either, especially with the managed money position solidly short in both corn and wheat. The end user can use open orders and maximum price type contracts to help maximize margin in this environment.
The result of tomorrow’s report could set price direction going forward, so get orders working before then, and take some time to analyze the report tomorrow to help make decision better informed going forward. The market has a tendency to trade the USDA numbers even if a large swath of people disagrees.