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Commodities Corner: Soybean futures mark highest finish since June as USDA cuts output and yield forecasts

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Soybean futures climbed on Monday after the U.S. Department of Agriculture reduced its 2022/2023 forecasts on the commodity’s domestic production and yield per acre, prompting prices to mark their highest settlement since June.

“There was a soybean surprise today, with the USDA lowering both a harvested and yield estimates,” Jake Hanley, managing director and senior portfolio strategist at Teucrium, told MarketWatch.

The USDA cuts its 2022/2023 U.S. soybean production forecast by 152 million bushels to 4.378 billion bushels, according to the monthly World Agricultural Supply and Demand Estimates report. It cited a lower harvested area and yield.

U.S. harvested area was down 0.6 million bushels from the August forecast at 86.6 million acres, while U.S. soybean yield forecast was at 50.5 bushels per acre, down 1.4 bushels from the August forecast, the USDA report showed.

“This is the third crop year in a row where U.S. soybean use is expected to exceed production,” said Hanley. The USDA forecasts domestic soybean use at 4.433 bullion bushels versus production of 4.378 billion bushels. “This means an even tighter balance sheet with the U.S. soybean stocks/use ratio back at the lowest level in a decade,” Hanley said.

The most-active November soybeans contract
S00,
+5.20%

SX22,
+5.20%

settled at $14.88 1/4 a bushel, up 76 cents, or 5.4%, in Chicago. The settlement was the highest since June 22, according to Dow Jones Market Data.

Meanwhile, analysts got what they were looking for in U.S. corn yields, with the USDA estimates basically matching the average analyst surveyed by Bloomberg, Hanley said. The government agency forecast domestic corn yield at 172.5 bushels per acre, down 2.9 bushels from the August forecast.

Still, the one million acres downward revision in the U.S. area harvested estimate, to 80.8 million acres, is likely adding additional price support, Hanley said. “I believe the trade will look for the USDA to lower yield expectations again in the October report.” 

December corn
C00,
+1.35%

CZ22,
+1.35%

added 11 cents, or 1.6%, to settle at $6.96 a bushel.

Both the soybean and corn “balance sheets are telling us that we should expect elevated prices for an extended period,” he said. “It’s impossible to rebuild supplies when usage is outpacing production.” 

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