Wednesday morning USDA issued the September crop report and the numbers indicating tight soybean supplies lit a fire under the bean market. The corn market however was bearish on news of just a slight drop in production and a lowered expected yield by only .6 of a bushel from last month. Analyst Tom Fritz at EFG Chicago said the main pressure on corn came from a hike in carryout.
“They raised the old crop carryout, new crop carry in, by 160 million bushels. Basically what they did is slash feed use by 150 million bushels. They slashed export use last season by 10 million bushels, and this is evidenced by the continuing reports we hear about smaller herd sizes.”
The new report drops U.S. soybean yield eighth tenths of a bushel per acre and production dropped 2 percent from August, but carryout was left unchanged.
“They USDA is not going to tell you we’re going to run out of beans,” Fritz said. “They just won’t do that, so they’ll make adjustments to demand such as they have. In this case they lowered crush by 15 million bushels, lowered exports by 55 million bushels, and I think lowering some of these demand numbers does reflect back on a slowing global economy. It acts as a reminder that beans are going to stay awfully tight until we have new crop availability out of South America.”
Fritz adds there is a weather premium now in the bean market because it is unknown when South American bean planting will begin due to very dry conditions there and no rain in the forecasts.
The 8:30 AM Eastern report release came in the middle of electronic trade Wednesday and market sparks flew immediately. Fritz says get used to it.
“When markets are open and you get these big reports you’re always going to get just huge volatility; algorithmic trading, basically black box trading. It’s like every report you’re going to see these vicious reactions within seconds after the report. It’s something that we’re just going to have to learn to live with.”[audio:https://www.hoosieragtoday.com//wp-content/uploads//2012/09/Tom-Fritz-on-September-crop-report.mp3|titles=Tom Fritz on September crop report]
Purdue Extension agricultural economist Corinne Alexander will offer additional analysis of the report and a 2013 Agricultural Outlook during a free webinar at 8:30 a.m. EDT Thursday. Click here to get to the webinar.