By Karl Setlzer

 The USDA unexpectedly raised the U.S. corn yield in the October supply and demand report to a national average of 176.5 bushels per acre, half a bushel above the average trade guess. This was enough to put yearly production at 15.02 billion bu (bbu), 20 million bu (mbu) higher than the September figure. Very few changes were made to corn demand, which put ending stocks at 1.5 bbu, up 100 mbu from September. This is a 10.1 percent stocks-to-use and requires less rationing.

Bigger changes took place in soybean balance sheets, adding to an already negative tone in the complex. The average U.S. soybean yield is now pegged at 51.5 bushels per acre, compared to the 50.6 bushel per acre estimate last month. This brought production to 4.45 bbu, a 74 mbu increase on the month. The only change to demand was a 10 mbu increase in crush which put ending stocks at a comfortable 320 mbu. This is a 7.3 percent stocks to use and not as concerning as previous levels.

A slight reduction of 51 mbu was made to the U.S. wheat crop, putting production at 1.65 bbu. Feed demand on wheat was lowered 25 mbu to give us ending stocks of 580 mbu. This is a 28.5 percent stocks to use and while large, is starting to generate more market interest as it has been steadily declining.

On the global side, corn reserves are forecast to total 301.7 million metric tons (mmt) this year, a 4.1 mmt increase from last month’s estimate. World soybean carryout is now estimated at 104.6 mmt, up 5.7 mmt from September. Global wheat stocks are forecast to decline 6 mmt this year to a 277.2 mmt total.

The USDA also updated its meat production estimates. For 2021, the United States is forecast to produce 27.83 billion pounds of beef, a 90-million-pound increase from the last estimate. Beef production in 2022 is projected at 27 billion pounds, a 120-million-pound increase on the month. Pork production for 2021 was lowered 70 million pounds to a 27.67-billion-pound total. Pork production in 2022 was cut a large 560 million pounds to a 27.59-billion-pound total. Average livestock prices for 2022 are now estimated at $128.75 per hundredweight on beef and $60.50 per hundred weight on pork.

Now that this data has been released, trade will quickly revert its attention to actual demand and harvest reports. As for harvest, we are starting to see more interest in country selling. Trade is taking this as a signal that yields are not as bad as initially thought and storage space is starting to fill. A weakening interior basis would help confirm these thoughts. Trade is paying close attention to Brazilian export bids and how much competition they are applying to U.S. sales. At the present time, Brazilian corn is being offered at a $1 per bushel premium to the United States as sellers try to ration out their remaining bushels. Brazilian soybeans are also at a premium to the United States of nearly 60 cents per bushel. We continue to see buyers book Brazilian soybeans though as U.S. export worries continue. The most interest is on fall deliveries as Brazil is selling product well beyond their normal export window.

Brazil is forecast to produce a considerably larger corn crop this year than last. Even so, there are questions on the country’s potential exports. Brazil corn forecast to expected to increase 34 percent this year to a 116 mmt crop according to the official CONAB estimate. CONAB is forecasting Brazilian corn exports of 39 mmt for the 2021/22 marketing year compared to 35 mmt for last year. This is not much of an increase given the elevated crop size, which may be even larger than the CONAB projection. Domestic corn usage is on the rise in Brazil which may limit exports, and support U.S. sales.

Inflation remains a primary factor in today’s markets, including the commodities. Inflation is driving up the cost of raw products used in manufacturing. This includes vegetable oils and cotton, but also the cost of grains needed to produce livestock. This inflation is also bringing managed money investors to commodities and causing volatility to build. While this has been welcomed by commodity sellers, it is causing consumer spending to decline.

One of the greatest impacts of inflation has been on world food values. Global food costs rose 1.2 percent in September and are now the highest level in a decade. Yearly food costs have risen a large 33 percent over last year. Given the current state of the commodity market these costs are likely to continue.

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