The latest USDA data dump had been debated over the last week on what would win out, the increased supply here in the U.S. or the global demand interest that has came back to the U.S.
The data had more bearish sentiments than what the trade expected but the surprise of the day was the market reaction.
We saw the market, post WASDE report, shrug off record yield estimates, for both corn and beans, and closed mixed on the day. The record USDA yield estimates may have the trade thinking that we have seen the high estimate for the year and we could see production numbers back pedal over the next few months. All in all, these were numbers most analyst thought could happen but wouldn't be posted, until later in the year.
The US corn yield was raised a whopping 7.1 bushels to 175.1 from 168 bushels per acre, from the July estimate. That pencils out to a 15.153 billion bushel production using the 86.6 million harvested acres. This topped all trade estimates on both accounts.
We saw the demand side of the equation raised as exports were increased 125 million bushels and feed and residual upped 175 million bushels. Even with the interest in the US corn ending stocks for 2016/17 grew to 2.409 billion bushels.
The 2015/16 ending stocks were raised to 1.706 billion bushels , an increase of just 5 million bushels. Corn prices ended positive on the day even after the bearish USDA data.
The data was as equally bearish on the soybeans. The yields were raised to a record number 48.9 bushels per acre compared to just 46.7 in July. This would be 0.9 bushels higher that the 48.0 bushel current record. With the harvested acres currently used, this puts total soybean production at 4.060 billion bushels. Above all trade estimates and first production year above 4 billion bushels.
The old crop ending stocks was tightened by 95 million bushels to 255 million bushels. There was an increase by 10 million bushels in crush and an 85 million in exports. The 2016/17 ending stocks were raised 40 million bushels to 330 million, with the expected production gains.
The markets certainly weathered the storm quite well all things considered.
Not knowing what direction it will take next week but many analyst may think that the USDA got a little ahead of itself and the high yield estimate for both crops has been posted for the year.
I will say that the trade was definitely thinking you could see these type numbers but the market reaction was unexpected. We could have very easily seen significant losses for the day with these lofty yields. Many traders will say if the market does not break on the bearish sentiment, like today, it may be headed for higher price action in the future.