October 21, 2018

How Accurate is the USDA’s August Yield Estimate?

Good Morning! From Allendale, Inc. with the early morning commentary for August 9, 2018.

Grain markets are consolidating ahead of Fridays USDA Supply and Demand report. Trade has many questions. How will they change ending stocks? How much will they raise yields for corn and soybeans in 2018?

How Accurate is the USDA’s August Yield Estimate? Allendale’s Rich Nelson says, “August yields were within 2 bushels of the January report in only 6 of the past 20 years. They were within 2 – 4 bushels of the January report 3 times. That means, “there was at least a 4 bushels movement in yields in 11 of the past 20 years.” Call your Allendale broker for more details.

August USDA Supply and Demand Report will be released on Friday at 11:00 am CDT. The trade will be watching for how much USDA raises yields. Allendale is estimating a 177 bpa for corn, Informa is at 176 bpa INTL FC Stone is at 178.1 bpa for corn and USDA last month was using 174.0 bpa.

Allendale is estimating a 51.2 bpa for soybean production on Friday’s report, Informa 50.0 bpa, INTL FC Stone is at 50.0 bpa and USDA last month was at 48.5 bpa.

USDA’s Weekly Export Sales report will be released at 7:30 this morning. Trade estimates are: Wheat 200,000 to 500,000 mt., corn old crop 300,000 to 600,000 mt., corn new crop 400,000 to 900,000 mt., soybeans old crop 100,000 to 400,000 mt. and soybeans 300,000 to 600,000 mt.

U.S. ethanol production last week surged to 1.100 million barrels/day (mbpd) from 1.064 mbpd the prior week, reflecting the 2nd highest weekly production rate on record. Additionally, this week's production reflected a substantial 8.7% year-over-year. Based on the last three weeks strong production rates, the USDA's 5.600 billion bushels corn for ethanol usage estimate is suddenly appearing it may need a modest upward revision.

German farm cooperatives estimate Germany’s 2018 grain crop will decline to 36.3 million tonnes, from the 45.5 million tonnes in 2017 which is a 20.3% drop do to the drought and heatwave across that country.

Fed Cattle Exchange had all pens offered and no sales. Packers offered $112 but that was rejected. Limited cash cattle sales were noted at $112. Last week's average trade was $113 with peaks on Friday of $114. There is a clear attempt to push cash cattle lower but it looks like packers are already raising bids.

Delivery Notices against futures have been zero with 9/22/2017 as the oldest date. August futures contract is holding the uptrend with support at 108 and resistance at 111.10.

Lean hog futures appear that they want to price in the fall/winter low right now. That's the only way you can justify current price slide. Trade is expecting a slaughter increase weekly in to the fall. Problems lie in the movement of product and the competing meat protein supplies available to consumers.

August lean hog futures continue to drop as buyers seem to be one of the reasons for the daily late sell-offs. Early day buying turns to late day selling. Any good news could provide a quick change in direction.

Dressed beef values were higher with choice up .24 and select up 35. The CME Feeder Index is 150.56. Pork cutout value is down 1.08.


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