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USDA Report Will Send Prices Lower, Basis Higher

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USDA Report Will Send Prices Lower, Bases Higher

Mike Silver, Kokomo Grain
Mike Silver, Kokomo Grain

The September Supply and Demand report released by USDA on Thursday confirmed what the market had expected: the big crop is getting bigger. The report projected 3% increase in corn and soybean production and resulting increase in ending stocks numbers.  Global ending stocks for corn were estimated at 189.9 million metric tons, up 2 million metric tons from the August report. Global soybean ending stocks were estimated at  90.2 million metric tons, one of the largest on record according to USDA. They also increased Brazilian production by 3 million metric tons and Argentine production by 1 million metric tons. This pushed futures prices lower in Thursday afternoon’s session.  Mike Silver, with Kokomo Grain, told HAT he sees a sideways to lower market as we move through harvest, “As I look at the market right now, I think we could trade these November soybeans down around the $9.25 mark. I would hope December corn would hold at $3.20.”

While the threat of an early frost cutting yields in northern states still exists, Silver says the huge crop will minimize any impact a freeze would have on prices, “I think that is the way the market is going to view this; any frost will have a limited price impact because of the size of the crop.” Silver said, as yield reports come in as the harvest reaches the heart of the corn belt, prices are likely to feel additional pressure.

Rain, however, is another matter.  A delay in harvest will mean a delay in new crop grain reaching the market, and that will push cash grain prices higher as processers push basis levels to grab all the grain they can.  Silver says this will provide some opportunity for growers to see grain at higher prices, “I would encourage producers to take advantage of any early harvest window and lock in some of those early harvest premium basis levels for soybeans.”  Silver said corn processors in Indiana are also offering premiums for quick delivery, in some cases upwards of 20 cents a bushel. Both processors and ethanol producers are in need of corn; old crop supplies are nonexistent, so they are offering incentives for any new crop grain.  The shortage of rail cars and slow field dry down will also help push cash prices higher in the short run as processors and ethanol producers scramble to meet their needs for grain this fall.