Market News and Headlines

In addition to freezing temperatures hitting the North Central U.S. over the weekend, the USDA's October crop update and supply/demand revisions on Friday, October 9th had some surprises for the trade, as both U.S. corn and soybean acreages fell while wheat stocks increased sharply.

The biggest surprise was the modest increase in the U.S. soybean crop of just 5 million bu. to 3.25 billion this month. Utilizing administrative data from the FSA's certification sign-up program, the USDA decreased planted and harvested acres by 213,000 and 148,000 acres, respectively. Expectations were for modest expansion because of this year's late planting in the ECB. Illinois plantings were raised 300,000 acres, but the WCB seedings were dropped 250,000 and Delta and SE plantings were cut 170,000 acres vs. the USDA's August levels. With the trade expecting a 7/10th of a bu. Increase, the USDA didn't increase its overall yield much (42.4 vs. 42.3 bpa) when IA, IL and MN's yields were unchanged and OH and MI yields dropped by 1 bu. this month. The USDA increased its 2009/10 export forecast this month by 25 million to 1.305 billion, but domestic processing was unchanged despite record meal and bean oil export sales on the books to begin the crushing season this month.

In corn, the U.S. yield increased to 164.2 bu. from 161.9 last month, but this year's planted and harvested areas had larger-than-expected declines of 684,000 and 713,000 acres on Friday's report. The ECB seedings were off 500,000 acres, according to administrative data from FSA, because of this spring's late plantings. But, the WCB drop of 400,000 acres (NE – 250,000) was the big surprise as this year's high input costs seemed to limit previous expansion ideas. The SW states of KS and TX however, raised their seedings by 150,000 and 270,000 acres, respectively, because of improved moisture in the Panhandle and western KS this year.

Overall, every general area of the U.S. corn crop saw its yield rise this month, but this month's reduced acreages kept the U.S. corn crop's production at 13.018 billion bu., up only 64 million from last month. Overall, 2009/10 demand ideas were unchanged, but the USDA added another 50 million bu. in feed while cutting exports by 50 million bu. this month. Given this year's slow maturity of the crop (57% vs. 88% 5-yr average), this weekend's freeze from the Texas Panhandle to Kansas City to Chicago and Detroit probably means a stable to minor increase in the 2009 U.S. corn yield is likely on upcoming updates, with 2009/10's ending stocks likely remaining the near the current 1.6 - 1.7 billion bu. range.

Higher-than-expected 2009/10 U.S. wheat ending stocks were also projected last week, when the USDA dropped its feed demand by 40 million to 190 million and decreased it export outlook by 50 million resulting in a 864 million June 1 2010 ending stocks, after upping the U.S. crop by 36 million last month. With world supplies remaining at 186 mmt again this month, the wheat market still has limited upside from its fundamentals, until lower U.S. and world seeding begin to be announced late this year.

Weather will likely remain a factor slowing this year's harvest progress, but the market's reaction to the latest USDA update and recent cold/wet conditions in the Midwest has pushed prices into our next sales ranges. Producers should take advantage of current strength to advance soybean sales to 50%, corn sales to 60% and wheat sales to 65%, respectively, with our initial 10% sales points for your 2010 output fast approaching our $4.20 and $9.80 price points.