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Big Stocks Get Smaller

Published on Monday, September 30, 2019

The USDA released their Quarterly Grain Stocks report on Monday.  A state by state breakdown of corn and soybean positions can be seen below:

Prior to the report, the average trade guess for corn and soybeans were as follows:

        CORN: Range of Estimates: 2.150 - 2.511 billion bushels
                     Average Estimate:  2.418 billion bushels
        SOYBEANS: Range of Estimates: 940 million - 1.035 billion bushels
                               Average Estimate:  981 million
The report was released at 11:00 Central time and as spelled out above, revealed a corn ending stocks number of 2.115 billion bushels.  Soybeans were published at 913 million bushels.  The distance between expectation and reality over the last 35 years can be seen in the charts below.

The average trade guess for quarterly corn inventory scored the third largest miss in 35 years.  For soybeans, it was the 7th largest.  The fact that the average estimate was that far removed from the published numbers caused an immediate response in markets.  Corn finished 16 cents higher while soybeans ended the day 23 cents higher.  See Charts.

While it has been a while since such movement has found its way into the grain complex, a sudden change in inventory causes massive shifts in mindset.  A declining ending stock estimate for the 2018/19 marketing year will have follow through in the coming marketing year as well.  Not all of today's projected decline needs to show up in the October WASDE report, however, smaller beginning stocks will likely filter through to become smaller ending stocks in the coming marketing year.  A sub-two billion bushel corn inventory will put more pressure on yield to carry weight through harvest.  Given the large psychological barrier that $4/bu presents, buyers and sellers alike are encouraged to contact us to talk through appropriate strategies moving forward.