Jon Scheve with weekly market commentary made on August 16, 2024
The August USDA report is arguably the 3rd most important report of the year, behind the June planting and stocks report and the January final yield report. A quick summary, it was neutral at best for corn, and very bearish for beans.
Corn Highlights
The USDA reduced planted acres by 800,000. They also increased the estimated average yield to a record 183 bushels per acre. Basically, the acre reduction and yield increase offset each other, leaving carryout about the same. Carryout is still projected to be almost 2.1 billion bushels, which is a little better than the 2.2 billion the trade had been estimating.
Bean Highlights
It seems the lost corn acres were likely planted to beans. The USDA increased bean planted acres by 1 million compared to the June estimate. They also increased the expected yield by 1 bushel per acre. These two increases raised the carryout by over 60% from last year and over 100% more than the year before that. Basically, the carryout is at trade war type levels.
Where Will Prices Go Now?
Beans have a big problem. The last time carryout was at these levels’ beans traded in the $8’s. Not only is the increased carryout a challenge, but South America is expected to expand their number of planted acres next year too. Maybe these low prices will cause them to pump the breaks on expansion. It could be difficult for beans to rally over the next two months until more is known about South America’s weather during the growing season. With 60% of the world’s beans grown in the southern hemisphere the weather 5 months from now is maybe more important than the weather this month in the US.
With beans being so bearish, it could become an anchor for corn. Plus, many farmers were waiting all summer for a rally that never came. It seems there is still a lot of unpriced old crop being stored in bins and very little new crop sold. Farmers are running out of time and space. The funds did manage to reduce their short position by 28% over the last 3 weeks and corn still traded lower during that time. It is difficult to see a reason why corn will rally very much until harvest is complete.
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387
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