While the USDA's September yield estimate for corn was less of a reduction than the trade had expected it was still a reduction nonetheless. This could be signaling that this is a trend where the USDA is now going to lower corn yield even further on subsequent reports. And, while the corn yield estimate came in higher than expectations the more important number - new crop carry over - declined more than expectations. This is where the bullish reaction likely came from.
The trade was looking for the new crop corn carry over to come in at just over 1.6 billion bushels and the USDA pegged it at 1.592. This represents a fairly substantial reduction from where the USDA was at last month at 1.713 billion bushels. Most of this reduction came from the old crop corn carry over (or beginning stocks) meaning that there will be less of last year's crop to take into the new year. this is bullish for corn because it suggests that corn demand is stronger than expected and also could suggest that strong corn demand could carry over into the next marketing season.
At the end of the day the market read this report as bullish with yield numbers beginning to come down and demand staying relatively constant. This could be the recipe for even smaller corn stocks in the future. However, the time frame is something to consider as we gear up for harvest. While most of the trade thinks that corn yields could be lower (maybe substantially lower) than the USDA's estimate there may still be a lot of cash corn sold in the coming weeks and this could add some pressure to the market. Longer term the corn outlook may be getting more positive on a few levels, but harvest pressure could keep things volatile in the near term.
Dec Corn Daily chart:
Nov Soybeans Daily chart:
Dec Wheat Daily chart:
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