“We have to say today’s report was bearish for corn in the sense that the ending stocks estimate came in above general expectations,” he said. “For soybeans, the report was neutral. There was one slight reduction in crush demand, but that is not a big factor. They kept the crop estimate unchanged for now.”

Looking ahead for both corn and soybeans, Hultman said all eyes are going to be on the January report.

“We will perhaps know a little bit more about how this harvest turned out,” he said. “Some of the crops being harvested right now, from here until finish, are going to be some of the toughest areas, so we still have a lot to learn about this 2019 crop.”

Corn

Hultman said there was not much done to corn’s balance sheet in this WASDE report, but there were changes on both the production and demand side.

The corn crop estimate had a yield reduction from 168.4 bushels to the acre to 167 bushels to the acre.

“That is fairly close to in line to what trade was expecting today,” he said adding there was no change to the harvested acres estimate.

“It was hard to know just how USDA would approach their crop estimates today,” he said. “My personal feeling is that there are still problems out in the country. They’re mostly in the northern states and we may not see that fully reflected in the crop estimate until January Maybe it was a bit of a kudos to USDA that they did at least reduce the yield estimate to 167.”

The corn crop estimate, Hultman feels, is still fairly high, although it was slightly lowered from 13.78 billion bushels (bb) to 13.66 bb.

“That’s a little closer to what we were expecting,” he said. “Through the fall, I’ve been guessing about 13.5 and that’s still maybe on track, depending on how things finish out this year.”

The demand changes, Hultman said appear to be bearish.

“We are now having a very tough time finding customers out in the world,” he said.

The feed demand estimate was reduced 25 million bushels (mb) down to 5.27 bb. Ethanol demand estimate was also reduced 25 mb down to 5.37 bb.

The demand estimate for exports, Hultman said is one he was very concerned about.

“As you might know, if you have been keeping up with our commentary at all, corn exports have not been doing well so far in the current season,” he said. “They reduced the corn export estimate 50 million bushels down to 1.85 billion bushels. I hate to say it, but there is still room for that to go lower. It may be a while before we get competitive again on our corn exports.”

Although there were few changes in the estimates for corn, Hultman said when you put them all together, it also did not change the ending stocks outlook much. USDA’s ending stocks estimate for corn is 1.91 bb, which is about 14 percent of annual demand.

How does this all play out for cash corn prices?

An ending stocks to use ratio of 14 percent, according to Hultman, given the pattern of historical cash corn prices, gives us an expectation for an average cash corn price of about $3.50 a bushel.

“We are trading a little bit above that now,” he said as of last Friday. “There can be a lot of play in that number where prices actually trade. Markets are emotional.”

World crop estimates for corn, Hultman said, actually showed a bullish change.

“It came largely from a revision from the previous season, 2018 to 2019 which just ended on Aug. 31 of this year,’ he said.

The beginning stocks dropped from 324 to 320 million metric tons (mmt) for the month of November.

“That four million metric ton drop in the beginning stocks was basically brought about by a six million metric ton increase in the previous season’s demand estimate for world corn,” he said. “That is quite a significant adjustment they made and that followed through to give us a lower ending stocks number today.”

The new USDA world ending stocks estimate for corn is just under 296 mmt and that is less than what was expected, according to Hultman.

“So, that is a bit of a bullish influence on today’s corn numbers,” he said.

Two other changes Hultman said, came from the current season. The world production estimate was reduced 2 mmt and that’s due to the slight reduction that was given to the numbers in the U.S.

The Ukraine crop estimate was also slightly reduced, Hultman said, for corn from 36 to 35.5 mmt.

Last Monday’s crop progress report, Hultman said, showed the 2019 harvest is still the second slowest on record, is the slowest pace since 2009 and the second slowest pace, he estimates in at least the past 20 years.

Soybeans

Hultman said there were no real significant changes for the U.S. balance sheet for soybeans.

“We see no changes for the crop estimate numbers, the yield stayed the same, the harvested acres stayed the same and the production total of 3.55 billion bushels stayed the same for soybeans,” he said.

The only change, Hultman said was a 15 mb reduction in the crush demand estimate.

“We recently had a crush report and it was down about five percent from a year ago,” he said. So, there has been a little bit of slow down in crush demand. This is probably related to Argentina getting legs back from having a larger crop this year and giving us a little more competition when it comes to soybean meal.”

Hultman said Argentina remains a “question mark itself” due to the election of a new president and the talks of higher taxes being placed on their grain exports.

“We will have to see what his new policy will be, but that is something that could actually help our soybean situation here in the U.S,” he said.

The crush incentive is just over 16 percent, Hultman said, which is based on the January futures contracts.

Overall ending stocks estimate for soybeans is now 475 mb.

“The only difference being that crush estimate that was reduced,” he said. “We are slightly higher than we were a month ago at 460 million bushels, but this is actually still supportive for our soybean prices where we are currently trading.”

How do today’s estimates look in terms of what to expect for prices?

“Last month, we were looking at an ending stocks to use ratio of 11 percent. This month’s 975 million bushels takes us up one point to 12 percent. It doesn’t change the price outlook a lot, but we are looking at roughly a $9 average cash price for soybeans. That would be the statistical center of where prices usually trade when we have a 12 percent ending stocks to use ratio,” said Hultman.

In comparing the soybean prices of the U.S. to Brazil, Hultman said the FOB (Free on Board) price at the port of Paranagua in Brazil has been pushing new highs.

“It’s almost its highest in a year at this time,” he said. “Priced up at an equivalent price of $10.31 a bushel. Our FOB soybean price in New Orleans have also been pushing a little higher, but they are only at $9.87. We are still at a 44 cent discount to Brazil’s FOB soybean price and I think that is part of the reason we have seen more activity for our soybean exports of late, even from China.”

The ending stocks estimate for soybeans, on the world scale, Hultman said, also did not change much. Instead of 95.2 mmt in October, now, USDA is saying 95.4 mmt.

The total world production estimate increased slightly, about two million metric tons, but it did not come from the big producers we would expect, Hultman said, adding that Argentina and Brazil’s estimates stayed the same.

“Brazil is in the midst of planting their soybeans right now, and they are starting to get more helpful rains. But there were no changes in their crop estimate outlook at this time,” he said.

There was a modest reduction in the world demand estimate for soybeans from 352 mb to just under 350 mb.

“We have a smaller production estimate and a smaller demand estimate and they both kind of offset each other and that ending stocks estimate didn’t change very much,” he said.

There has been no change in the outlook of China’s import estimates this month, Hultman said as they remained steady at 85 mmt.

“To USDA’s credit, China has been a much more active soybean buyer in the last month and a half,” he said.

The big bullish surprise to soybeans, Hultman said, is obviously, a much smaller soybean crop.

“That is what really helps to support prices at a time when it could have been a much tougher situation had we had a normal crop,” he said.

Much like corn, the soybean harvest is also at its slowest since 2009.

“It’s not an ideal crop this year. It wasn’t planted in an ideal time and it’s not being harvested in an ideal way, but, it looks like progress is being made and things are getting done,” he said.

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