This week started out with optimism in the grain markets. Rains were disappointing over the weekend and traders were looking forward to friendly reports from the USDA on Thursday. All that came to a screeching halt on Thursday with the USDA data. Within a matter of seconds, moderately higher markets turned sharply lower. A summary of the key data is below. The biggest surprise of the day came in the bean market. Thursday reports showed the estimated bean yield INCREASING from the July estimate of 48.0 bushels per acre to 49.4 bushels per acre. This alone was enough to briefly drive prices nearly $0.35 lower before settling down $0.33 on the day. Corn yield also surprised the market with a smaller than expected 1.2 bushel per acre reduction. Even with the lower yield, the USDA still anticipates a 14.1 billion bushel crop for the coming year, enough to keep yearly carryout over 2 billion bushels once again.
Now that corn prices are the lowest we have seen since September 2016, beans are the lowest since June of this year, the big question is, what next? The trade still believes yields are over stated in corn and it is reasonable to expect yields to decrease in the coming reports the USDA gets more first hand yield estimates. Soybean yields are considered suspect as well because most believe it is difficult to predict bean yields this early in August. So, until we see lower printed yields, we have to trade the current numbers as printed, believe them or not. That being said, the sell off on Thursday did some serious technical damage to the charts, implying a meaningful recovery is not imminent. Not impossible, but not immediate either.
|8/10/17||Pre-report range of estimates||Previous Estimate||Change||Market Impact|
|Bean Production||4.381||4.165— 4.307||4.260||+0.121||BEARISH|
|Bean Yield||49.40||46.9— 48.0||48.0||+1.4||BEARISH|
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