KANSAS CITY, MO. (RFD-TV NEWS) — USDA’s October World Agricultural Supply and Demand Estimates (WASDE) report raised its U.S. corn yield forecast to 181.2 bushels per acre, above both the previous estimate and the average trade expectation, sending corn futures lower following the report’s release.
Arlan Suderman, chief commodities economist with StoneX, joined Market Day Report to break down the numbers and discuss what the report could mean for grain markets.
Corn Yield and Ending Stocks Increase
USDA raised its corn yield estimate from 178.5 to 181.2 bushels per acre. The average trade estimate was 177.7 bushels per acre.
Suderman said the increase reversed the direction of the previous two months’ estimates.
The larger crop projection pushed expected corn production to approximately 16.034 billion bushels, an increase of 234 million bushels from the previous month’s estimate, according to the report discussion.
Corn ending stocks for the current marketing year rose to 1.849 billion bushels, above the average trade estimate of 1.67 billion bushels.
Suderman said the larger supply reduces the need for prices to rally to ration demand.
Soybean Estimates Stay Closer to Expectations
USDA estimated soybean yields at 53.1 bushels per acre, up from the previous estimate of 52.8 bushels per acre and slightly above the average trade expectation.
Soybean ending stocks were projected at 315 million bushels, about 10 million bushels above the average trade estimate and 5 million above USDA’s previous forecast.
Suderman said soybean supply estimates remained close to expectations, while corn saw a larger increase in projected supply.
Cotton Market Watches Hurricane Risk
Cotton futures showed less reaction to the report, even as USDA raised its production forecast by 2% from the previous estimate.
Suderman said potential weather damage from a hurricane moving toward the Southeast may be supporting the market.
He estimated that 10% to 15% of the nation’s cotton crop could be vulnerable to high winds and related yield concerns.
Corn Demand Becomes the Key Question
With USDA projecting a larger corn crop, Suderman said stronger demand will be important to the market outlook.
He pointed to the possibility of additional Chinese purchases, including corn, as one potential source of demand. He also discussed distiller’s grains exports and ethanol as possible areas of opportunity.
“There’s a big mix of products that could go to China,” Suderman said. “It’s just we’re anxious to see what they actually will do.”
He added that distiller’s grain exports have been strong and could provide another avenue for demand growth.
Suderman also discussed the possibility of ethanol finding new opportunities in ocean shipping as companies look for cost-effective ways to meet environmental standards.
For now, he said, the market needs an unexpected increase in demand to help absorb the larger corn supply.
