Special Market Update
Grain Market Commentary
Monday, September 13, 2021
by Chris Hillburn, Senior Merchant, The Andersons
USDA WASDE Report Background
- The USDA announced back in August they would update planted acres in the September WASDE report. USDA uses FSA certified acres to estimate and revise planted acres, but usually holds off on using FSA data until the October WASDE report. This year evidently USDA thought the certification process was far enough along to do this in September. FSA data is not released until after the WASDE report is issued, see #2.
- On Tuesday of last week, news agencies checked the FSA website and found latest data was updated and these FSA acres were posted. This was done prior to the September WASDE report on Friday which is completely unprecedented. New agencies downloaded the information and sent it to clients. Soon after this data gaffe the website was shut down, so not everyone had equal access to this information. Market sold off on Tuesday. Later, USDA reposted all the information so everyone would have equal access to it.
- FSA certified acres are always lower than USDA planted acres as not everyone participates in government programs and so not all crop acres are certified with the FSA. The relationship between FSA acres and USDA planted acres has been studied through the years and the average relationship is well known, but like all estimates there is a margin of error. Market believed the data indicated 1 million or more acres of corn planted and traded accordingly, right up to the WASDE report at 11 a.m. on Friday.
After all the hoopla above, USDA did increase planted and harvested corn acres, but only by 600,000 acres. Yields were increased by 1.7 bpa. After changes in demand the ending stocks number for 21/22 crop year increased to 1.408 billion, an addition of 166 million bushels. At this point the stocks to use ratio stands at 9.5%, not super bearish but not enough to get the market charged up.
Given the FSA data showed all but about 30,000 producers had certified acres, would not expect a big revision in planted acres in the October report. The estimated corn yield of 176.3 was just about equal to what simple regression models based on crop conditions estimated.
Bottom line is that the supply situation appears to be known, s.t. yield revisions. Question now becomes what kind of demand will corn market see. On the Bull side we see strong harvest basis levels and a major exporter (Brazil) which has lost at least 30 mmt of production. Will export demand come to the U.S. and how strong will it be. On the Bear side are questions about China demand for corn, the New Orleans gulf ports getting up and going, and a very expensive line up for ocean freight.
Technicals show support at the 200-day moving average of $5.07, resistance at previous support in the $5.30-$5.35 range and then up to 100 and 200-day moving averages at $5.46 to $5.50. Seasonals would indicate major lows in corn in the LH August to FH September time frame, (the Labor Day Low).
One of the most interesting questions about USDA report is looking at the Average Farm Price for corn projected by USDA. This price was cut by 30cts per bushel down to $5.45 in September report. Interesting to note that today this is about 30 cts above December 21 corn futures and not quite 20 cents above the July 22 futures contract. Is USDA indicating better prices down the road? USDA does have a historical bias towards underestimating corn demand, but timing is everything. Watch the September 1st quarterly stocks numbers (released on September 30th) to get a better idea of last year’s yields and usage.
Small revision down in planted and harvested acres but yield was increase by .6 bpa to 50.6 bpa. This estimate is a little higher than simple regression models based on crop conditions would indicate (50 bpa). USDA does have a tendency to historically overestimate soybean yields, anywhere from ½ to 1 ¾ bpa. USDA also has a tendency to overestimate YSB ending stocks, but again, timing is everything. Given an ending stocks number of 185 million bushels, small yield revisions will make a difference. Stocks to use ratio now stands at a very tight 4.85% November 21 futures tried to get above $13 mark on Friday. Resistance at $13.00, support at 200 day moving average at $12.62 (Friday’s low). If market can close above $13 then 100 and 200-day moving averages provide resistance in the $13.34 to 13.60 range. USDA September report did drop the average cash price for producers from $13.70 to $12.90, which is just above today’s November 21 futures price of $12.85. Evidently the USDA is not as optimistic about cash price of soybeans vs corn?
Given the major increase in SAM soybean production, every 6 months we have a major harvest going on, either in North America or South America. Simply means that every 6 months this market can move to big surplus Supply situation or to tight Supply situation. Will be interesting to watch September 1st quarterly stocks number on soybeans (released September 30th) to evaluate soybean yields and usage last year. Here in South Central Nebraska, harvest basis for soybeans historically strong, as elevators want to load shuttles for harvest export markets.
Have a safe harvest!