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USDA Report Update, Markets and Weather Outlooks

Update for November 13th, 2018

Last Thursday the USDA announced their latest figures for the 2018 growing season. A few notables for corn:

· Corn production was reduced by 152 million bushels from the October estimate due to lower yields.

· U.S. corn ending stocks were reduced by -77 million bushels from October but this was offset by a key adjustment higher in Chinese data.

· Feed and Residual were lowered by -50 million bushels based on smaller crop and higher prices.

· Exports were reduced by -25 million bushels based on increased competition from Ukraine.

· Corn for Ethanol use remained steady.

· European Union production was lowered mostly due to reductions in Hungary, Poland and Germany.

· The U.S. season-average corn price was increased by +$0.10 to a midpoint of $3.60 per bushel with a range from $3.20 to $4.00.

· Soybean production in the U.S. was lowered by -90 million bushels from the October estimate due to lower than expected yields.

· Soybean yields are projected at 52.1 bushels per acre this 1.0 bushel decline from October is mainly due to disappointing yields in Iowa and Illinois.

· Exports were lowered by 160 million bushels based on lower imports to China.

· Ending stocks are projected at 955 million bushels which is an increase of +70 million bushels.

· The global supply of soybeans are up +2.0 million tons to 112.1 million.

· The U.S. season-average soybean price range is expected span from $7.60 to $9.60 per bushels which is unchanged at the midpoint.

U.S. Harvested Acres 2018 (in million acres)

Average Trade USDA

Nov. # Trade Est. Range Sep 2018

Corn 81.767 81.749 81.500 - 81.800 81.767

Soybeans 88.348 88.303 87.900 - 88.350 88.348

U.S. Yields 2018 (in bushels per acre)

Average Trade USDA

Nov. # Trade Est. Range Sep 2018

Corn 178.9 180.0 178.2 - 181.0 180.7

Soybeans 52.1 52.9 52.5 - 53.5 53.1

U.S. Production 2018 (in billion bushels)

Average Trade USDA

Nov. # Trade Est. Range Sep 2018

Corn 14.626 14.721 14.576 - 14.806 14.778

Soybeans 4.60 4.676 4.637 - 4.698 4.690

U.S. Ending Stocks 2018/19 (in billion bushels)

Average Trade USDA

Nov. # Trade Est. Range Sep 2018

Corn 1.736 1.773 1.688 - 1.841 1.813

Soybeans 0.995 0.898 0.833 - 1.010 0.885

Wheat 0.949 0.958 0.925 - 0.981 0.956

World Ending Stocks 2018/19 (in million metric tons)

Average Trade USDA

Nov. # Trade Est. Range Sep 2018

Corn 307.51 158.82 157.00 - 160.20 159.35

Soybeans 112.08 110.91 109.50 - 113.50 110.04

Wheat 266.71 259.45 257.50 - 261.20 260.18

A reduction in ethanol demand is causing some plants across the U.S. to deal with tighter margins. The recent fall in crude oil prices is largely to blame and in response some of these facilities are cutting back on production or are stopping production all together until the situation improves. China had recently been our second largest ethanol customer and now U.S. ethanol is facing additional competition out of South America and the Black Sea Region.

Corn prices have traded within a narrow range of $3.60 to $3.80 per bushel since October 1st and the market has not closed above $3.80 since early August. Typically we see the USDA reduce their yield forecast from the October to November report (which we saw this yr.) and then again tends to move a bit lower by the year-end report. Unfortunately though we may not see much price improvement during this time period due to other factors affecting our market prices. A few of those major factors being the cooperative weather producers are finding in South America which is pushing their planting way ahead of normal pace along with their increasing overall export volume. In addition the U.S. Dollar has now reached a 16-month high which is limiting our export growth.

Soybean prices are facing a steep uphill battle. The USDA reduced the yield estimate in this last report but overall production is still expected to be +175 million bushels higher than a year ago. Add to that an export outlook that looks dim, we are already -300 million bushels behind this point last year. Last year the USDA November report showed estimated ending stock of 425 million bushels, the November, 2018 report estimates a huge 955 million bushels. Analysts warn that IF there is no macro-weather issue in South America OR a trade-war resolution with China, U.S. soybean prices could easily fall below $8.00 a bushel.

While America’s farmers are unable to do business with China, several giant U.S. grain trading companies have found a way. Cargill, ADM and Bunge all signed soybean contracts this week with Chinese buyers. Our U.S. soybeans will be bypassed and instead these U.S. agribusiness companies will source soybeans for China from Brazil, Argentina and Uruguay.

The outlook for Thanksgiving week from the National Weather Service shows normal precipitation for most of the Midwest and Plains and warmer than normal temps.

The Climate Prediction Center has issued their “experimental” 3-4 week outlook. Experimental temperature forecasts use a combination of dynamical models and is predicting above normal temps for much of the Lower 48 and western Alaska. The forecast for the 3-4 week period for precipitation is much more complex which makes accuracy more difficult. The maps below show the experimental outlooks for December.

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