Jon Scheve with weekly market commentary made on October 13, 2023
I had been saying the USDA feed number was off all year. They finally changed it to be more in line with the total animals on feed estimate the USDA has been using throughout 2023. Harvested acres were not reduced in the October report, but yield was slightly lowered. It seems ear counts were high, but corn test weight was low. With the yield reduction and increased feed usage, potential carryout next summer decreased 5%. Unfortunately, carryout is still estimated to be above two billion bushels, which leaves the stocks to use ratio very burdensome. The USDA’s corn export estimate is still very aggressive, and with what we know today, that might be unattainable. US corn delivered to Asia is priced 30 cents higher than Brazil’s corn. That means a corn rally will be difficult until the price differential comes more in line. Most commercial facilities and end users emptied their bins during the inverse market this summer to increase profitability. Now the market is transitioning back to a carry market, where near term futures contracts are lower than contracts that follow. That means many end users are trying to fill up their “pipeline” with grain early during harvest. They are paying higher than usual basis values for harvest delivery, to take advantage of carry premium available in the market down the road. Many farmers have not sold much if any of their new crop corn yet. That means there could be increased pressure at the end of harvest when farmers run out of on-farm storage. These farmers may end up selling their excess grain to commercial storage facilities or end users instead of paying high dump fees or storage rates. Beans, on the other hand, have more opportunity moving forward. The USDA lowered yields again, and if ending stocks are realized, it would be the tightest carryout since summer 2016. Plus, the USDA also lowered next year’s export pace estimate, which if realized, would be just 5% higher than the lowest export pace the US had during the trade war years. This export pace may seem like an attainable number; however, the global supply is not tight. There are plenty of beans in South America. Therefore, it may take a weather issue in South America in December or January for a big price rally.
Jon Scheve Superior Feed Ingredients, LLC
9358 Oak Ave Waconia, MN 55387 jon@superiorfeed.com
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