(NASHVILLE, TN)– On Monday, USDA released their August World Agricultural Supply and Demand Estimates (WASDE) and the latest Crop Production reports which indicated a record national average yield estimate for both corn and soybeans.
Corn is estimated to have a average yield of 183.1 bushels per acre and soybeans are estimated to be 53.2 bushels per acre. John Heinberg with Total Farm Marketing said on Monday’s Market Talk podcast that, realistically, these numbers were mostly anticipated.
“You know, and realistically, this was relatively anticipated in terms of these yields, maybe not to the level that we we got today,” says Heinberg. “But at the same time, you look at the range of estimates and, you know, we were thinking as high as in terms of the analyst estimates 184 in terms of that number today. You know, we look at the crop ratings and look at the weather. Things have been progressively good. And in that regard, plus even this most recent weather that we’ve got here too, just allowing this crop to just continue to fill. You know, I wouldn’t be shocked if that number still has a little bit more upside room as long as things stay status quo on the weather front.”
Heinberg added that he knows there are areas that have had problems and there’s going to be concerns out there, but the good areas are outweighing the bad at this point.
“I got a lot more people that are sitting back just saying, I’ve got a monster coming. I’ve heard that from Missouri to Illinois to Iowa, up into Minnesota, northern Wisconsin, Indiana, and even into Ohio in some regions. So it’s gonna be a case where the good outweighs the bad, and when you cut acre numbers down, that takes out lower producing potential crops. And that increases your yield. So that’s part of the formula as well today, at least on that corn side.”
On the soybean side, Heinberg said that it was fortunate the market was only down 18-20 cents on the day with extra acres added, a record yield forecast and a new soybean carry out number at 560 million bushels. He says that carry out has a potential to increase if demand doesn’t pick up.
“Yeah, you know, definitely in the soybean side of things puts a big weight on things and a limiting factor here. You know first off we are already struggling with new crop demand now we got a stocks to use up to 12.8 on that new crop supply, you know 560 million bushels is a heavy supply. That’s one of the largest we’ve seen in a handful of years. And then they (USDA) also added more to the demand side, which at this stage, I guess, obviously, if cheap prices do occur, we will probably sell more product. I’m in the camp right now that USDA has got next year’s demand a little bit overstated and that carryout number could very easily be over the 600 million bushel mark.”
Heinberg points to producer and farmer selling as one of the key things to watch with these markets in the short term. He says “So now what’s it come down to? I think also a big part of the market reaction right now, what’s happening with the producer and farmer selling, you know, we’ve been seeing, you know, we’re in that window, September basis contracts probably need to be priced out in the next couple of weeks. You know, we’ve actually seen the activity and the managed money and the fund flow. The funds have actually shaved a hundred thousand contracts off their short position in the last handful of weeks and prices are net negative. Well, the biggest reason why as producers make sales, the commercial sell the board to match that position. Therefore the commercial selling is what’s been driving prices lower and the funds would be easily to walk away from their short positions, probably with some pretty good gains.”
And he added “You know, unfortunately now they got some ammunition. If they want to hop back into this market, push it down, you know, we’re trading, like I said, about 110,000 contracts off our most recent low in terms of net short.”
Watch the full conversation with John Heinberg from Total Farm Marketing on Monday’s Market Talk podcast below:
