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USDA Surprises With Higher Yield

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Good Morning! From Allendale, Inc. with the early morning commentary for November 10, 2017.

Grain markets continue to react to yesterday's round of USDA Supply and Demand data which surprised many traders. Outside markets continue to monitor the latest from Washington as fears spread that a tax overhaul may not get done.

New crop corn stocks number were increased on yesterday's USDA report from 2.340 billion to now 2.487, well over the 2.366 trade estimate. The main component of the higher stocks number was the increase in yields from 171.8 to 175.4 bpa - a big surprise to corn traders.

New crop soybean stocks were lowered from 430 to 425 million. That was near the 420 million trade estimate. A slight change was made to production, dropping from 4.431 billion in October to 4.425. USDA did not, however, change any demand numbers, and this would imply a drop in stocks to use from 9.9% to 9.8%.

Current crop wheat ending stock estimate was lowered from 960 million to 935. The trade guess was 957. This came from a 25 million bushel increase for wheat exports.

Weekly Export Sales for the week of October 26 November 2 reported combined corn sales totaled 2,938,667 metric tonnes during this time (2,364,487 2017/18 + 574,180 2018/19), far above the 1,700,000 2,300,000 trade expectation. This was the best sale of the marketing year that started on September 1, and was also the largest corn sale for this particular week in history.

Soybean export sales totaled 1,160,988 metric tonnes (1,160,588 2017/18 + 400 2018/19), below the 1,300,000 1,850,000 trade expectation. USDAs goal for this years soybean exports is for a record 2.250 billion bushels. Year to date sales total 1.157 billion bushels. That is 13% under last year at this time and 1% under the five year average. We will see if President Trump's trip to China this week helps soybean sales along.

Wheat export sales were came in at 781,741 metric tonnes (781,739 2017/18 + 2 2018/19), well over the 350,000 550,000 trade expectation. This was the best sale of the wheat marketing year so far. It was the best sale for this particular week in eight years.

Conab, estimates spring 2018 Brazilian soybean harvest from 106.4 - 108.6 million tonnes. They also suggest the corn crop will run 91.6 - 93.1 mt. These estimates are down from last year's record 114 and 98 mt crops respectively.

SovEcon raised its Russian grain crop estimate up from 132.9 million tonnes to 134.1. Of that, they raised the wheat crop estimate up from 82.9 to 83.9.

Managed money funds were estimated to be very active in yesterday's reported-led selloff. Traders estimate they sold 26,000 corn, 12,000 soybeans, 5,000 soymeal, and 3,000 soyoil. They were buyers of 4,000 wheat.

USDA's Q4 beef production estimates in October were 7.115 billion, 7.4% over last year. Yesterday that was revised down to 6.965 billion, or 4.7% over last year.

Q4 pork production was dropped from 7.035 billion lb. to 6.955. That brings the year over year comparison from 5.8% year over year growth to now 4.6%.

Weekly beef export sales ran 16,773 metric tonnes for 2017 and 5,514 for 2018. The current year sale was 11% over last year in the same week. We have had three weeks of strong sales recently. Year to date sales are 12% over last year.

Weekly pork export sales showed only 7,788 tonnes for 2017 delivery and 325 for 2018. This was the lowest sale of the year so far. It was also 66% under last year.

Dressed beef values were lower with choice down .39 and select down .59. The CME Feeder Index is 158.98. Pork cutout value is up .65.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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