Perspective: Mid-Day Commentary for October 10

By: Arlan Suderman, Chief Commodities Economist

Thu, 10 Oct 2024, 16:31

Perspective: Mid-Day Commentary

Arlan Suderman

Chief Commodities Economist

October 10 - Stocks opened softer this morning, but then firmed through much of the morning after this morning's data dump showed slightly hotter inflation than expected in September, but larger jobless benefit claims due to Hurricane Helene. The VIX is still modestly elevated near 21 at midday, while the dollar index trades near 102.9 after setting fresh eight-week highs today. Yields on 10-year Treasuries are trading near 4.08%, after posting fresh 10-week highs, while yields on 2-year Treasuries are trading 3.97%. Crude oil prices are nearly 3% higher on renewed war risk concerns in the Middle East, while the grain and oilseed markets are mixed ahead of tomorrow's USDA crop report, with wheat modestly higher while corn and soybean prices are modestly weaker.

Tomorrow's USDA WASDE crop report will update the agency's U.S. corn and soybean yields, in addition to incorporating its September 30 quarterly stocks numbers into its domestic balance sheets, while also making adjustments to its global balance sheets. For soybeans, we start with a very modest increase of 2 million bushels to its beginning stocks estimate, based on that September 30 report. I plugged in the 53.5 bushel per acre yield that came from our October 1st customer survey to give us a crop of 4.613 billion bushels, up 27 million bushels from USDA's September estimate. Add in 15 million bushels of imports, and that gives you a total supply of 4.970 billion bushels.

On the demand side, I put total 2024-25 U.S. soybean usage at 4.310 billion bushels, down 21 million bushels from USDA's September estimate of 4.389 billion. My crush estimate is 2.440 billion bushels, up 15 million from USDA, while my seed & residual use estimate is 135 million bushels, up 19 million bushels from USDA. However, my export target is 1.735 billion bushels, which is up 35 million from USDA's previous year estimate, but down 115 million bushels from USDA's most recent estimate for the current year. Typically, we would have 76% of the marketing year's final exports committed via sales by the end of the year. That's because our primary export season extends from October through January. We currently have 40% of USDA's target of 1.850 billion bushels committed, down from 42% a year ago, and down from the 10-year average pace of 47%. That translates into current commitments falling 137 million bushels short of the seasonal pace needed to hit USDA's target this year. China remains the primary buyer of U.S. soybeans, including net purchases of 21.4 million bushels in the week ending October 3. But it is only buying hand-to-mouth, with virtually nothing purchased yet for delivery in December and January as it hopes that the Brazilian farmer will let go of larger supplies before then. USDA overstated exports by roughly 125 million bushels at this time a year ago, and I believe it is doing the same thing this year as well. The bottom line is that my ending stocks estimate of 660 million bushels is 110 million above USDA's September latest estimate.

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