USDA Stuns The Soybean Market With Changes in October Report

USDA's October Crop Production and WASDE reports caused the soybean market to tank Tuesday.

In its reports, USDA increased yields for corn and soybeans this month. The corn yield now sits at 176.5 bu. per acre, up slightly from last month. Soybeans are now pegged at 51.5 bu. per acre. That is nearly a full bushel above last month.

Soybeans production is now expected to be 4.45 billion bushels, up 2% from last month and if realized it would be a new production record.

Soybean prices have now fallen following both the September Grain Stocks report, as well as Tuesday's USDA October supply and demand report.

"We did have the yield go up nearly a bushel per acre, and the expectation was for yield to go higher. So, that was not a surprise. We're now at 51.5 bushels per acre," Brian Splitt of AgMarket.net told AgDay's Clinton Griffiths. "Yield is where we thought it would come in and now, as we move forward, we think that number could continue to go higher."

Splitt says based on reports from the field, AgMarket.Net thinks USDA could continue to push the national soybean yield higher, with the possibility that the U.S. hits a new soybean yield record this year.

Given that possibility, the increased yield and the fact USDA raised the soybean carryout to 320 million bushels, he thinks the report could have been even more bearish than what USDA printed Tuesday.

"We were thinking maybe the carryout would go up near 370 million bushels. It might over time," Splitt adds. "I think this report could have been worse for soybeans than it was. If you look at the world stocks, they came in bigger than the September WASDE report. So that's adding to a little bit of the pressure here. Then you look at the corn and the wheat markets with corn world stocks bigger than expected and wheat world stocks less than expected. It's a net net between the two feed grain stocks and actually about unchanged month to month. So I think you're going to continue to see wheat become the leader, versus corn, and it needs to continue to make sure it's priced out of feed rations."

Splitt says the biggest concern he has is soybean prices. Soybean production estimates are growing and there are warning signs for demand.

"When you look at the export pace that we have right now, that would suggest that the USDA is too high. Some are saying as much as 200 million bushels too high," Splitt says. "Now we know that can change at a drop of a hat if China comes in and decides to start a major buying program. But, they've been rather absent for a while. We just don't see those 8 a.m. sales on the wires like we were a year ago when they were in here just buying ferociously."

Splitt thinks as Brazil pushes to plant soybeans this year, China may take a wait-and-see approach until buyers know how the weather and production picture will turn out in South America.

"They may just kind of bide their time and wait for this new crop out of Brazil. Again, a lot of the estimates right now are calling for a mid-140 million ton type of a number. If we do have good weather, that's a trend type of a yield," he adds. "So, if we have good weather that could go north up near 150 million tons and that's not going to be good news in the big picture for soybeans."