November 9 – Market Commentary

The Week in Three Numbers

180.6 bushels per acre - Bloomberg's average pre-report yield expectations.

4.03% - The spread between the current export pace and the pace needed to hit the USDA's October WASDE export projections, up from 3.34% last week.

165 million - My estimated reduction in corn exports that the USDA will eventually make.

The Market

Have you ever jumped off a cliff? Or gone sky diving? I'll admit, it's thrilling, but when corn, wheat and soybeans do it, it's not nearly as much fun.

Corn is on its third straight week with a bold red number. Soybeans also have a new bold red, just as the old one rolled off the board. Soybeans have now dropped for a fourth straight week. Another week, another bold red number in HRW, its fifth in a row. HRW is also into the double digits for consecutive weeks closing lower. Live and feeder cattle dropped for the second straight week; each having lost almost $15. The energies dropped after last week's election with crude dropping almost $14, gasoline nearly 40 cents, and diesel dropping 40 cents in two weeks. Meanwhile, soybean oil hit a second straight bold red number. The financials had an opposite reaction to the election, with the S&P 500 dropping over 200 points as AI stocks took a hit. The U.S. 10-year Treasury note traded largely the same, closing slightly higher, while the dollar index set another bold green number after trading laterally for three weeks.

I've said it for several weeks, but in lieu of the WASDE report being surprisingly bullish, we could be looking at new 52-week lows before December is over. December corn has blown through previous levels of support, and that $4.25 low doesn't seem too far out of sight.

So, before we talk about what the WASDE report could say tomorrow, let's touch on a couple pieces of important information that will play a role in the numbers.

Exports were better last week but are still lagging. Last week saw just over 1 million metric tons of corn leave the U.S., 86% above the previous week, though still not enough to make up for the last two weeks of lackluster shipments. This led to a furthering in the spread between pace and percentage needed to hit the USDA's numbers we've been tracking.

Sales were down another 1% week-over-week. Total sales commitments are down nearly 40% year-over-year.

Meanwhile, it was another great week for ethanol production, topping 1,143 gallons, the largest since EIA has tracked weekly ethanol production.

Now, it's worth talking through expectations for tomorrow's WASDE report.

Last week, I estimated we'd keep production steady, and increase food, seed and industrial on cheaper prices, increase ethanol production with strong numbers throughout October, and ultimately decrease exports significantly as we're behind pace. All of this is to say that ending stocks in my scenario end up over 2 billion bushels. I'll caveat all of this with the statement that pulling that much out of the export totals is quite aggressive and I doubt the USDA will actually make that move. It's more likely this is the number over the next several months rather than November.

Bloomberg on the other hand has pre-report trader expectations at a decrease in yield, leading to lower production, with higher demand and a slightly lower ending stocks from October.

Overall, there's probably a middle ground. Both the bears and bulls have decent arguments to make. The Bloomberg survey is the average pre-trade guess, however, there are bears out there that flip to the other side. StoneX, for example, is forecasting 183.1 bushels per acre with a total U.S. production of 16.203 billion bushels. I'm leaving supply alone for the time being.

We've discussed ad nauseum the issues with exports at the moment. Even at historically high export numbers, the USDA's estimates are pretty darn high and we're struggling to reach those. The bears agree with me - the USDA will eventually need to trim out some exports, even if it's not now.

Ultimately, the floor and ceiling for this corn price will potentially be set by tomorrow's WASDE.

And if you're curious about which scenario is more likely, the bear or the bull, it might be helpful to see where the funds are sitting with their money. Corn lost another 20,000 long contracts last week, while the shorts added another 50,000 positions. Corn is still net long, but not by much. Soybeans also remain quite long, while HRW added another 5,000 short positions.

Harvest continues to roll at a relatively slow pace. We're still around 5% behind schedule.

Looks like it's a dry week ahead as we try to finish up harvest.

Soil moisture continues to improve, with topsoil seeing a 2-percentage point improvement to surplus, and subsoil gaining 4 points in adequate to surplus.

And I for one am particularly grateful for cooler weather.

The Week Ahead

Tomorrow's WASDE is obviously the big one. The market will be watching whether USDA follows traders' expectations and lowers yield, or whether the larger crop estimates we've seen elsewhere prove closer to the mark. On the demand side, exports remain the number I'll be watching most closely, though strong ethanol production could provide some offset. After the report, the question becomes whether December corn can finally find a floor-or whether we start testing those summer lows.

Stay safe out there!