Morning Comments October 1, 2021

Combine Grain Cart

Wheat was the hero we didn't know we needed yesterday, helping to keep corn supported while soybeans fell off after what would be considered a bearish stocks report. 

Yesterday's USDA soybean stocks figures came in well above pre-report expectations and last month's WASDE ending stocks figure. This increase mostly due to an 81 mbu production increase to last year's crop, taking yield from 50.2 bushels per acre to 51.

This adjustment is a tough blow for soybeans as we are already struggling with just what this year's export program will look like with a stronger dollar, reduced Gulf capacity, high freight costs, seemingly lackluster Chinese demand and a Brazilian crop that has the potential to come in nearly 260 million bushels higher than a year ago.

The surprise increase brought bean bears out of hibernation with lots of chatter about 21/22 soybean carryout potentially ballooning to over 400 mbu by the time we get to next summer. 

On the corn side of things, we got a surprise increase in stocks as well, though this change more reflecting a decrease in feed usage than a production gain from a year ago as the USDA reduced last year's corn crop by 71 mbu. This adjustment due to a reduction in yield from 172 to 171.4.

As we've talked about throughout the week, yesterday's numbers are what we will now use as beginning stocks for the 21/22 crop year. Beginning stocks are of course a component of available supply, so any shift in the figure we are using there carries through the entire balance sheet. When we get updated supply and demand figures in a couple weeks we will see these changes, with the potential they could be offset or exacerbated by any adjustments higher or lower in production. 

While corn and bean bulls are struggling a bit here, the wheat bull continues to be fed everyday it seems. Yesterday's stocks figures came in lower than expected for all-wheat stocks with what appears to be a bit in the way of larger than expected feedings (though the increase in wheat feedings has been incredibly obvious to anyone on the cash side of things) and a reduction in Hard Red Winter wheat production.

In addition to lower-than-expected stocks, we are starting to hear more in the way of chatter regarding a potential reduction to Russian wheat plantings. Market analysts there have been talking about the export tax in the country limiting the farmer's desire to plant wheat and are now claiming overall wheat acres could be down a million from last year.

Russia has seemingly made a pretty solid shift in policy after becoming the world's largest wheat exporter, changing the rules of the game in an attempt to keep much of their wheat in the domestic market hoping to keep prices cheap for millers.

Of course, with prices where they are, a million-acre loss in Russian wheat production could be a drop in the bucket of overall global production if Mother Nature cooperates, but for now the bulls are on parade and wheat is doing everything it can to support the overall grain complex as a whole.

Looking ahead, we will continue to see how traders manage their expectations with the changes in the balance sheet. Lots of folks want to talk about continued support to basis with pockets of strength throughout the country as an indicator of greater than expected demand, but the reality is when looking at stocks the farmer has 429 million bushels of open space he/she didn't have as we rolled into harvest last year, with the commercial sitting on 522 million bushels of storage space that's open--this just taking into consideration the changes in corn and beans.

As we're said before it always takes longer to fill an empty pipeline than we ever expect, don't get lulled into a false sense of complacency as harvest rolls on, remain aware of marketing opportunities as they come. 

Corn up 2 to 3

Beans down 1 to 3