The latest USDA Grain Stocks report, which was released Sept. 30, was supportive to both corn and soybeans. As a result, there was quite a move up in corn and soybean prices right after the report was released.
According to the report, old-crop corn came in on Sept. 1 at 2.11 billion bushels (BB), down 1 percent from last year’s 2.14 BB. With the end of the 2018-2019 marketing year, that 2.11 BB carries over as the beginning stocks for the 2019-2020 marketing years.
“It’s slightly lower than a year ago, but more importantly, it’s lower than what the trade estimate was looking at,” said Ed Usset, professor emeritus and grain marketing economist with the University of Minnesota. “The trade was looking at something more than 2.4 billion bushels (2.463 BB according to the report), so about 300 million bushels less than expected. That’s kind of bullish.
“I’m looking at the market, and at least right now, we’re up 10 (cents a bushel) and we’ve been up more. It was a pleasant surprise,” he added.
Why were the stocks lower than what analysts and the trade had been expecting?
“What did we miss? The expectations are not a shot in the dark, it’s based on some thoughts on consumption by animals, consumption by ethanol plants and exports,” Usset said. “I don’t know exactly why stocks are lower. I wait for people who comb through the numbers better than me. All I know is that it was a surprise and a pleasant surprise.”
The report did indicate more usage than expected. Also, on-farm storage for corn was projected at 753 million bushels (MB), which was a 22 percent increase from last year’s on-farm holdings on Sept. 1. Off-farm stocks were projected at 1.36 BB, down 10 percent from last year’s total. The June-August “disappearance” or usage was 3.09 BB, down slightly from 3.16 BB for the same period in 2018.
Although there was nothing specific on demand for corn beyond the rumblings about a soft ethanol market and the fact that some plants have shut down and some have pared back, Usset noted that’s not a healthy sign for corn demand.
Looking ahead to the 2019 corn harvest, Usset pointed out that this year’s crop had its share of problems from the beginning and it continued through the growing season.
“We were too wet at planting, and we really don’t need to be too wet at harvest, but here we are and we’re awfully wet and that’s not a good lead-in to corn or soybean harvest,” he said. “The rains are a big deal in terms of soybean and corn harvest. Things are getting delayed and we don’t need delays. We don’t need a wet corn crop.”
The distinguishing characteristics of this year’s crop is that it was planted late, there was more than ample moisture and a shortage of growing degree days.
“We’re going to have a lousy crop and a drying bill to boot. It’s like kicking a guy when he’s down, so it’s an issue,” he said. “I looked at another year in Minnesota that was like this year – 2014 – and our final yields in 2014 were disappointing. They were worse than the August and September estimates, so I’m wondering if it’s not shaping up that way.”
One thing Usset pointed to as a potential positive is that corn may have hit its pre-harvest low.
“I would not be surprised to learn that our lows (on prices) are in on the corn market,” he said. “December 2019 corn got awfully close to $3.50, and as I speak, right now we’re 30 cents off our lows and that low was made around Sept. 9 at around $3.52, and here we are 30 cents higher.
“Even though harvest hasn’t begun,” Usset noted, “it’s not uncommon to put in an early low in corn, and also in soybeans, and I wouldn’t be surprised if we haven’t seen our low. But don’t confuse that with the idea that we’re going into a great big bull market. I’m just saying maybe no more lows.”
At one local elevator in west central Minnesota regularly followed in this column, as of Sept. 30, the cash price for corn was $3.37 and basis was 35 cents under. April 2020 price was listed at $3.52 and basis was 40 cents under.