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Grains Pause Their Sharp Mover Lower in the Overnight Session

Today's Market will Continue to Digest the WASDE Report

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In the overnight session the grains seemed to pause their sharp move lower that was triggered after the USDA’s 17/18 corn, soybeans and wheat production estimates topped analyst forecasts in the latest WASDE report. We should also note, better than expected precipitation last night in western Illinois and the latest weather models show the 6-15 day forecast bringing precipitation and much needed relief in the western corn belt.

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Today, the market will continue to digest the surprise in yesterday’s reports.

The most bearish part of this report was the new crop production forecasts which showed corn yield forecast at 169.5 BPA and soybean yield at 49.4 BPA compared to an average analyst expectation of 166.2 and 47.5 BPA respectively. These numbers surprised the markets and caused sharp selling pressure immediately following the report's release.

Ending stock forecasts for 17/18 corn were 270 million bushels higher than the average guess among analysts in the Reuters poll. The smaller than expected revision in corn yield and 25 million bushel decline in both exports and feed and residual caused ending stocks to soar to 2.273 billion bushels, well over analyst forecasts.

New crop soybean ending stocks were also higher than analysts were expecting despite lowering old crop carry-out and increasing exports by 75 million bushels. Ending stocks were still higher than the July WASDE by 15 million bushels, primarily due to the larger than expected yield revision from 48 BPA to 49.4 BPA.

The WASDE report held the old crop corn balance sheet steady keeping ending stocks at 2.37 billion bushels surprising many analysts that expected to see a revision lower in corn used for ethanol. Old crop soybean ending stocks were revised lower than the average analyst expectations.The revision was a result of reducing crushings by 10 million bushels and increasing exports by 40 million bushels.

US wheat ending stocks also surprised traders after yield was revised lower by only .6 BPA leaving new crop stocks at 933 million bushels compared to the 907 million bushels expected.


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