Good Morning,

As expected the USDA had a issue estimating the size of last year’s corn and soybean crops! For months many have argued that they were too high…and they were proven correct in the end. NASS revised down 2018 bean production by a record 116M bu. with yield down 1.0 bpa to 50.6 bpa. Planted area dropped 300k acres as well to 89.2M acres with harvested area down 400k acres to 87.6M acres.

September 2018/19 corn stocks missed the average guess by over 320M bu. at 2,114 Mil Bu due to enlarged feed/residual use. This would mean we saw record corn feed/residual use in the 4th quarter.

The bears will struggle to sustain much downside pressure until the trade has a better idea about 2019 corn and soybean yields. Following a miss of more than 2.5% by the USDA on both corn and beans, traders will question the methodology that they used to calculate the size of the 2018 crop when it is likely being applied to the calculations for 2019 crops. One possible culprit to the miss could be the cold/wet harvest weather we saw last fall.

There is no evidence of a Midwest frost/freeze into the middle of October and this should allow crops to continue to mature, but temperatures will be becoming more seasonally cool across the northern Corn Belt which slow things down some.

While yesterday’s report put a spark in the markets, the long term issue remains demand. Until we see a shift in exports or domestic demand this market has no reason to move dramatically higher or lower. The current stocks to use ratio sits at 13% with the USDA’s latest number. We would have to drop yield to 164 bpa to get stocks below 10% which is historically the level we need for corn to trade above $4 on the CBOT.

This morning corn is up 2 and soybeans are up 5.

Have a Safe Day!

Garry Gard