USDA Stocks Report Provides Market Support

The report was psychologically positive for soybeans and wheat, according to Arlan Suderman with Waterstreet solutions.  “We saw the hard red winter wheat crop come in at 827 million bushels, down 29 million from expectations, while soft red winter came in at 359 million, down 24 million from expectations. Hard red spring wheat production came in at 599 million bushels, down 26 million from trade expectations.”

Soybean futures rallied after the release of the number that confirmed that the USDA had under estimated the size of last year’s soybean crop revising 2014 production to 3.93 billion bushels, down 41.7 million from the previous estimate. USDA dropped last year’s planted area by 425K acres, while cutting the harvested area by 470K acres. It also cut its 2014 soybean yield estimate by 0.3 bushel to 47.5 bushels per acre.

USDA pegged September 1 corn stocks at 1.731 billion bushels, up 499 million bushels from the previous year, but down 8 million from the average pre-report trade estimate. The data showed that off-farm supplies of corn stood at 65.7% of available stocks, up from 62.5% previously. “This should support firmer basis tendencies in some of the production deficit states like Illinois, Indiana and Ohio,” noted Suderman.  December corn rallied within a half-cent of the September high of $3.95, before pulling back following the USDA stocks data release. “Traders were not willing to push prices above that level without stronger support from the yield data. Unfortunately, that leaves a double-top on the charts, which needs to be overcome to avoid rebuilding bearish sentiment,” Suderman said.

“Wednesday’s report was not bullish, but it was supportive, feeding the narrative that the market has already priced in the most bearish scenario,” said Suderman. “Keep in mind that USDA was projecting 2014-15 soybean ending stocks to be 475 million bushels a year ago. We found out that they were actually 191 million bushels. The agency currently projects 2015-16 soybean ending stocks at 450 million bushels. It’s September ending stocks estimate proved to be too high in 13 of the past 19 years by an average of 101 million bushels.”