@sdelsad/commodity-desk-daily 1.0.22 → 1.0.23
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<title>Soft Commodity Trading — Ep 7: WASDE and Building a Balance Sheet</title>
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<div style="display:none;max-height:0;overflow:hidden;mso-hide:all;">The line nobody measures moves about ten times faster than the crop.</div>
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<table role="presentation" width="600" cellpadding="0" cellspacing="0" border="0" align="center" style="width:100%;max-width:600px;background:#faf7f1;border:1px solid #e3ddd2;">
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<tr><td style="padding:30px 28px 24px;background:#faf7f1;"><p style="margin:0 0 6px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Soft Commodity Trading</p><p style="margin:0 0 14px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.14em;text-transform:uppercase;color:#8b8375;">Episode 07 · Tuesday 18 August 2026 · 10 min 15</p><h1 style="margin:0 0 12px;font-family:Georgia,'Times New Roman',Times,serif;font-size:29px;line-height:1.2;font-weight:normal;color:#16110c;">WASDE and Building a Balance Sheet</h1><p style="margin:0 0 22px;font-family:Georgia,'Times New Roman',Times,serif;font-size:17px;line-height:1.5;color:#4a4238;">The line nobody measures moves about ten times faster than the crop.</p><table role="presentation" cellpadding="0" cellspacing="0" border="0"><tr><td bgcolor="#1d4032" style="border-radius:6px;"><a href="https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.20/ep07.mp3" style="display:inline-block;padding:14px 28px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:15px;font-weight:bold;color:#faf7f1;text-decoration:none;border-radius:6px;">▶ Listen — 10 min</a></td></tr></table></td></tr>
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<tr><td style="padding:0 28px 22px;background:#faf7f1;"><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:13px;line-height:1.6;color:#4a4238;"><a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07.html" style="color:#1d4032;font-weight:bold;">Read this episode online →</a><span style="color:#8b8375;"> · charts, the quiz and the running glossary</span></p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#f4efe4;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Conversion drill 7 of 12</p><h3 style="margin:0 0 12px;font-family:Georgia,'Times New Roman',Times,serif;font-size:19px;line-height:1.3;font-weight:normal;color:#16110c;">Millimetres ↔ inches of rain</h3><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Rule:</strong> 1 inch = 25.4 mm</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Fast method:</strong> inches → mm: ×25 (×100 then ÷4). mm → inches: ÷25 (÷100 then ×4).</p>
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<ul style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">"1 to 3 inches across the Midwest" → <strong>25 to 75 mm</strong></li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">0.5 inch → <strong>13 mm</strong></li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">40 mm → <strong>1.6 inches</strong></li></ul>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Why it matters:</strong> rainfall forecasts drive grain prices, and the two systems appear in the same conversation constantly.</p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td align="center" style="padding:20px 28px;background:#f4efe4;border-top:1px solid #e3ddd2;border-bottom:1px solid #e3ddd2;"><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;font-weight:bold;letter-spacing:.12em;text-transform:uppercase;color:#8a2f2f;">Solutions below — answer first</p></td></tr>
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<tr><td style="padding:10px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Solutions</p><p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A1.</strong> The arithmetic first.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Line</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Desk</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">USDA (Aug)</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Carry-in</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,945</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,945</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Production</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">15,859</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">16,013</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Imports</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">25</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">25</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Total supply</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>17,829</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>17,983</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Domestic use</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">13,100</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">13,055</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Exports</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">3,350</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">3,275</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Total use</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>16,450</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>16,330</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Ending stocks</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>1,379</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>1,653</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Stocks-to-use</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">8.4%</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">10.1%</td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">All figures in million bushels. Production is 88.6 × 179.0 = 15,859. (USDA's published 16,013 is about 3 m bu above 88.6 × 180.7 — rounding in the acreage and yield they print. Worth noticing the first time you try to rebuild a published sheet and cannot make it tie.)</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Now the comparison the question is really asking for. The yields differ by 1.7 bu, or <strong>0.94%</strong>. The carryouts differ by 274 m bu, or <strong>16.6%</strong>. That is a factor of roughly eighteen, not ten, and the extra leverage comes from the demand side: the desk is carrying 120 m bu more use than USDA. Decomposed, the 274 is 154 m of yield-and-rounding and 120 m of demand. The trap the question sets is the assumption that a carryout gap is a crop-view gap. Most of the time it is half a crop view and half a demand view, and only one of those two halves gets discussed on television.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A2.</strong> <strong>Feed and residual absorbs it,</strong> and ending stocks falls 90 m bu — from 1.653 to 1.563 bn, taking stocks-to-use from 10.1% to 9.6%. Nothing else in the sheet is allowed to move, because feed and residual is the line derived by subtraction.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The two stories:</p>
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<ol style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Real demand.</strong> Livestock ate more than modelled — bigger herds, cheaper corn, better rations. This is a genuine tightening and it should persist into the next quarter.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Phantom supply.</strong> The crop was never as big as printed. The stocks survey is measuring physical inventory, so if it comes in light, either use was higher or production was overstated. A production overstatement gets revealed slowly, through the residual, quarter by quarter.</li></ol>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The curve tells you which one the market believes. If the trade takes it as real, present demand is tighter <em>now</em>: the nearby month bids relative to the deferred, spreads firm, and a carry market flattens or inverts. That is bull spreading, and it is a statement about physical availability. If the trade takes it as a statistical artefact likely to be revised away, flat price wobbles on the headline and the spreads do not move — the curve is saying nobody is short of corn today. <strong>Flat price reacts to news. Spreads react to grain.</strong> A move in one without the other is the market telling you how much it believes.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A3.</strong> The surprise was <strong>72 m bu</strong>, not the 159 m bu that the 1.8 bu/ac yield miss implies on 88.6 m acres. Half of it was absorbed on the way down the page by higher area and higher exports. In stocks-to-use terms the trade went in at 1,725 ÷ 16,330 ≈ 10.6% and got 10.1% — about half a point of tightening. That is what the 20¼¢ paid for, and it is a reasonable price for it.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">What happened afterwards was a different trade. Corn did not hold its gain and then add another six cents on Monday because of the report. It did so because Black Sea export capacity stayed impaired, because the eastern belt turned too wet, and because the whole complex was being pulled up by soybeans on Chinese demand. None of that was in the WASDE.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">So a trader long into the print was paid twice, for two separate reasons, and needed to be right about both to still be there on Monday. Being right about the report bought about a day. Staying long required an independent view on export capacity and August weather. The lazy reading — "bullish report, market up" — conflates an event that resolved in ninety seconds with a trend that has been running for two weeks. The discipline is to book the event P&L, then re-underwrite the position on the trend as a fresh decision.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A4.</strong> <strong>Exports fall, and the ethanol grind inside domestic use falls.</strong> Both are price-elastic on a timescale of weeks.</p>
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<ul style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Exports</strong> are the fastest. US corn competes with Brazilian, Argentine and Ukrainian corn at destination. A 70¢ rally is about $27.50/t; the buyer simply calls another origin. This is ep 5's flow substitution, running on the demand line instead of the supply line.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Ethanol grind</strong> is a margin, not a preference. The plant buys corn and sells ethanol and distillers grains. Corn up 70¢ with ethanol unchanged compresses the crush, and marginal plants slow down. Demand stops appearing at the bid.</li></ul>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Feed is the third lever but the slowest and, right now, the furthest away: ep 6 put Chicago wheat about $54/t above its feed-switch level, so the substitution bid is nowhere near being triggered.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The inconsistency is this. A balance sheet is a set of <strong>quantities at an assumed price</strong>. If you tighten stocks and let price rise, you must also let the demand lines respond, or you are counting the tightening twice. That feedback is why carryout estimates converge rather than diverge: tighter stocks lift price, higher price rations demand, rationed demand rebuilds stocks. Rationing is not a metaphor — it is the arithmetic by which the sheet closes at a higher price. The analyst's edge sits almost entirely in how fast and how far they think that response runs.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A5.</strong> For <strong>corn</strong>, very little is left. Pollination determines ear count and it is long finished; 76% dough and 4% mature means kernel number is set and the crop is filling. What remains is test weight, late-season disease, and an early frost risk that is still weeks away and low-probability. The weather premium has largely decayed, exactly as ep 6 described, and it decayed whether or not the forecast improved.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">For <strong>soybeans</strong>, the crop is genuinely still open. Beans set pods and fill seed through August, so August rainfall and August heat still move the yield. With 85% setting pods, a rating of 61% good to excellent and seven points of deterioration against last year, there is a real distribution left to price.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">You would rather own the beans — and Monday's tape is the evidence: beans +23½¢ against corn +6¼¢ on the same weather map. The sharper version of the answer is that you would rather own <em>optionality</em> on beans than futures, because the same decay clock that has already emptied the corn premium is running on the bean premium too, and it accelerates from early September. A long call spread pays for the distribution without paying carry to the calendar.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A6.</strong> Two different risks, and the question is whether you can tell them apart under pressure.</p>
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<ul style="margin:0 0 16px;padding-left:22px;"><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Voyage risk</strong> passed to the buyer at the ship's rail in Santos. A typhoon diversion mid-ocean is the buyer's risk of loss, not yours. Under CFR you contracted the freight, so a late vessel is your dispute with the carrier under the charter party — but it does not move cargo risk back onto your book.</li><li style="margin:0 0 9px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Documentary risk</strong> is entirely yours, and it is the live one. A letter of credit is a bank's undertaking to pay against <strong>conforming documents presented before expiry</strong>. Miss the expiry and the undertaking lapses. You are then an unsecured creditor of the buyer, holding a cargo already at their risk, in a market where they may prefer to renegotiate.</li></ul>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>The documentary risk is what threatens the P&L.</strong> Nothing has happened to the beans. The practical moves are to request an L/C amendment extending expiry and the latest shipment date before it lapses rather than after, to present documents early if the bill of lading and quality certificate are already in hand, or to ship documents against a letter of indemnity if originals are chasing the vessel. Ep 4's point restated: the cargo is fine, and the paper is what pays.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A7.</strong> Convert first. 60,000 t × 36.744 bu/t = <strong>2,204,640 bu</strong>. At 1216 c/bu the cargo is worth <strong>$26.81 m</strong>.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Line</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Value</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Cargo</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">2,204,640 bu</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Cargo value at 1216 c/bu</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$26,808,422</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Demurrage, 3 days × $26,500</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">$79,500</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Demurrage in c/bu</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">3.6 c/bu</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Demurrage as % of cargo value</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">0.30%</td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Desks quote it in cents per bushel because that is <strong>the same unit as the margin</strong>. A cargo bought at "November minus 20" and hit with 3.6 cents of demurrage was really bought at minus 23.6. In dollars, $79,500 against $26.8 m looks like a rounding error and gets waved through. In cents per bushel it sits next to the differential that the entire trade was argued over, and 3.6 cents is a fifth of the twenty. Execution costs only become visible when they are expressed in the unit the trader negotiates in — which is why the execution desk reports in cents, not in invoices.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A8 — Conversion drill answer.</strong> 82 mm ÷ 25.4 = <strong>3.23 inches</strong>. 0.35 inch × 25.4 = <strong>8.9 mm</strong>. The fast method gets you close enough to trade on: 82 ÷ 100 × 4 = 3.28, and 0.35 × 100 ÷ 4 = 8.75.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The <strong>82 mm</strong> is the number that matters this week. Excessive rain across the eastern Corn Belt in mid-August, with corn 76% at dough and beans 85% setting pods, brings lodging and disease pressure into crops that are filling, and it is behind the one-point slip in both condition ratings on Monday. It lands on the <strong>yield term of production</strong>, on the supply side of the 2026/27 sheet.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The 8.9 mm in western Kansas is a soil-moisture story for hard red winter seeding in September. It reaches a balance sheet too — but the 2027/28 one, through planted area and abandonment. Same week, two rainfall figures, two different marketing years. Keeping them apart is most of the skill.</p>
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<h3 style="margin:26px 0 10px;font-family:Georgia,'Times New Roman',Times,serif;font-size:19px;line-height:1.3;font-weight:normal;color:#16110c;">Written edition</h3>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">A balance sheet is one page. Supply on top, demand underneath, and what is left over at the bottom. It is not a forecast and it is not a model. It is an accounting identity, and it has to close.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Supply is three lines.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Line</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">What it is</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Carry-in</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">What was still in store when the previous marketing year ended</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Production</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">Harvested acres × yield per harvested acre</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Imports</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">For US corn, a rounding error</td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Two things in that table are quietly load-bearing. A <strong>marketing year</strong> is the crop's own calendar, not the accountant's: US corn and soybeans run September to August, US wheat June to May. And production uses <strong>harvested</strong> acres, not planted. Around 8 million planted US corn acres never get cut for grain in a normal year.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Demand is four lines: feed and residual, ethanol, food/seed/industrial, and exports. Then ending stocks, which is total supply minus total use.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Ending stocks is not measured. <strong>It is what is left.</strong></p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The August numbers, in million bushels.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;"></th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">2026/27 US corn</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Carry-in</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,945</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Production (88.6 m ac × 180.7 bu/ac)</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">16,013</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Imports</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">25</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Total supply</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>17,983</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Domestic use</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">13,055</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Exports</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">3,275</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Total use</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>16,330</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Ending stocks</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>1,653</strong></td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Stocks-to-use</strong></td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>10.1%</strong></td></tr></tbody></table>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:6px 0 22px;"><tr><td align="center" style="border:1px solid #e3ddd2;background:#faf7f1;padding:10px;"><img src="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07_chart1.png" width="522" alt="US corn 2026/27, supply down to carryout — Ending stocks is the difference between two numbers that are both around sixteen billion. That is what makes it move so much. — USDA WASDE, 12 August 2026. Carry-in is the figure implied by the published stocks and use." title="US corn 2026/27, supply down to carryout — Ending stocks is the difference between two numbers that are both around sixteen billion. That is what makes it move so much. — USDA WASDE, 12 August 2026. Carry-in is the figure implied by the published stocks and use." style="display:block;width:100%;max-width:522px;height:auto;border:0;outline:none;text-decoration:none;"></td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Stocks-to-use is the number a desk quotes out loud, because a bushel figure means nothing without the size of the market next to it. 1,653 over 16,330 is 10.1%.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Look at the size of the terms. Production is 16.0 billion bushels. Ending stocks is 1.65 billion. Production is roughly <strong>ten times</strong> the line it feeds.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">So a 1% error in the crop is a 10% error in the carryout.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Take the yield down two bushels, from 180.7 to 178.7. That is 1.1% on the yield line. On 88.6 million harvested acres it is 177 million bushels of production.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Yield (bu/ac)</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Production</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Ending stocks</th><th align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:right;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Stocks-to-use</th></tr></thead><tbody><tr><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">178.7</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">15,836</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,476</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">9.0%</td></tr><tr><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">180.7 (USDA)</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">16,013</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,653</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">10.1%</td></tr><tr><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">182.7</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">16,190</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">1,830</td><td align="right" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:right;border-bottom:1px solid #e3ddd2;vertical-align:top;">11.2%</td></tr></tbody></table>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:6px 0 22px;"><tr><td align="center" style="border:1px solid #e3ddd2;background:#faf7f1;padding:10px;"><img src="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07_chart2.png" width="522" alt="Two bushels of yield, eleven percent of carryout — A 1.1% change in the yield input moves ending stocks by about 11% in either direction. The balance sheet is a lever, and the fulcrum sits very close to the crop. — Calculated on the August 2026 WASDE sheet, holding demand and area constant at 88.6 m harvested acres." title="Two bushels of yield, eleven percent of carryout — A 1.1% change in the yield input moves ending stocks by about 11% in either direction. The balance sheet is a lever, and the fulcrum sits very close to the crop. — Calculated on the August 2026 WASDE sheet, holding demand and area constant at 88.6 m harvested acres." style="display:block;width:100%;max-width:522px;height:auto;border:0;outline:none;text-decoration:none;"></td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Eleven percent either way, out of a one percent input. That is the whole reason a yield estimate is worth arguing about for six weeks.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>A warning about that table, though.</strong> It holds demand fixed, and a real balance sheet does not. A sheet is a set of quantities <em>at an assumed price</em>. Cut the crop, lift the price, and exports and ethanol grind both start to fall — which rebuilds part of the stocks you just removed. Rationing is not a metaphor. It is the arithmetic by which the sheet closes at a higher price.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">The relationship between stocks-to-use and price is not a line. It is a curve, and it bends.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">From 15% down to 12%, price barely notices. There is plenty of corn either way and the marginal bushel is not scarce. From 10% down to 8%, price goes vertical, because at that level somebody has to be rationed out of the market and price is the only tool that does it.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Which means the same two-bushel yield move is worth almost nothing at a comfortable stocks-to-use and an enormous amount at a tight one. At 10.1%, corn is close enough to the bend that the market is paying attention — and that, rather than the headline figure, is why an August yield print gets traded as hard as it does.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Feed and residual.</strong> Two words, and the second is doing real work.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Nobody counts the corn a hog eats. Feed use is inferred: take the quarterly Grain Stocks survey, subtract everything that can actually be measured, and whatever remains gets called feed and residual. So every measurement error in the sheet — in production, in exports, in the survey itself — lands in that one line.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Which means that when feed and residual moves, sometimes it is telling you about livestock, and sometimes it is telling you the crop was never the size they said it was.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Ending stocks is a residual. Feed and residual is a residual sitting inside it.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Here is what the argument sounds like the morning before a report.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="margin:0 0 20px;"><tr><td style="border-left:3px solid #a8813c;padding:4px 0 4px 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.55;font-style:italic;color:#4a4238;"><strong>Analyst:</strong> I have got carryout at one six eight.<br><strong>Trader:</strong> On what yield?<br><strong>Analyst:</strong> One eighty-one. Same as theirs.<br><strong>Trader:</strong> Then where are we actually different?<br><strong>Analyst:</strong> Exports. You are carrying three three, I am at three two.<br><strong>Trader:</strong> A hundred million bushels of Mexico. That is not a crop view, that is a freight view.</td></tr></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Notice where the disagreement sat. Not the yield — they agreed on the yield.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">That is the pattern, and it has a structural cause. <strong>Supply is surveyed.</strong> Fields are walked, ears are counted, acres are measured from satellite imagery and from farm programme filings. Two analysts working from the same surveys land close together.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;"><strong>Demand is inferred.</strong> Nobody surveys a feedlot's intentions. Export commitments are known, but shipment timing is a decision somebody else has not made yet — which is precisely what the Chinese soybean programme is demonstrating this month.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">So two competent analysts converge on supply and diverge on demand. Which is why the interesting positions ahead of a report are rarely outright: a demand view is a view about <em>when</em> and <em>where</em>, and that lives in spreads.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">On 12 August USDA cut the corn yield to 180.7 bu/ac. The trade average going in was 182.5. So the yield surprise was 1.8 bushels — 159 million bushels of production, gone.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">And the carryout printed only about 72 million below what the trade was carrying.</p>
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<table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0" style="width:100%;border-collapse:collapse;margin:0 0 20px;"><thead><tr><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Line</th><th align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;font-weight:bold;letter-spacing:.09em;text-transform:uppercase;color:#4a4238;text-align:left;padding:0 8px 8px 0;border-bottom:1px solid #16110c;">Effect</th></tr></thead><tbody><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Yield surprise, −1.8 bu/ac × 88.6 m ac</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">−159 m bu</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;">Area and demand revisions</td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;">+87 m bu</td></tr><tr><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;font-weight:bold;"><strong>Carryout surprise</strong></td><td align="left" style="font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.45;color:#16110c;padding:9px 8px 9px 0;text-align:left;border-bottom:1px solid #e3ddd2;vertical-align:top;"><strong>−72 m bu</strong></td></tr></tbody></table>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Half the surprise disappeared on the way down the page. This is the trap that catches anyone who trades one line: <strong>the market does not price the yield, it prices the carryout</strong>, and the carryout has an area term, a demand term and a carry-in term, any of which can pay for a bad yield.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">December corn added roughly 20¼¢ on the print. It then did not hand it back — it closed Monday 17 August at 489½, above its report-day close. But that was a different trade. The follow-through came from impaired Black Sea export capacity, a soaked eastern belt and a soybean complex pulling the whole board higher on Chinese buying. None of it was in the report.</p>
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<p style="margin:0 0 16px;font-family:Georgia,'Times New Roman',Times,serif;font-size:16px;line-height:1.62;color:#16110c;">Which is the last honest thing to say about report days. The number is the shock. The market is what happens over the next three weeks, and it needs its own reason.</p></td></tr>
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<tr><td style="padding:0 28px;background:#faf7f1;"><table role="presentation" width="100%" cellpadding="0" cellspacing="0" border="0"><tr><td height="1" style="height:1px;line-height:1px;font-size:1px;background:#e3ddd2;"> </td></tr></table></td></tr>
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<tr><td style="padding:24px 28px 4px;background:#faf7f1;"><p style="margin:0 0 12px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:11px;line-height:1.4;font-weight:bold;letter-spacing:.16em;text-transform:uppercase;color:#a8813c;">Glossary</p><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:14px;line-height:1.6;color:#4a4238;">Every unit and expression the show has introduced lives on the episode page, and it stays up to date. <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07.html#glossary" style="color:#1d4032;">Open the glossary →</a></p></td></tr>
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<tr><td style="padding:22px 28px 30px;background:#ece7db;border-top:1px solid #e3ddd2;"><p style="margin:0 0 6px;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;line-height:1.7;color:#4a4238;"><strong>Soft Commodity Trading</strong> — a daily briefing on physical commodity trading.</p><p style="margin:0;font-family:'Helvetica Neue',Helvetica,Arial,sans-serif;font-size:12px;line-height:1.7;color:#8b8375;"><a href="https://storage.googleapis.com/podcast-audio-2647223968/index.html" style="color:#4a4238;">All episodes</a> · <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/feed.xml" style="color:#4a4238;">Subscribe by RSS</a> · <a href="https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07.html" style="color:#4a4238;">This episode online</a></p></td></tr>
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package/email.txt
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SOFT COMMODITY TRADING
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Episode 07 · Tuesday 18 August 2026 · 10 min 15
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WASDE and Building a Balance Sheet
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The line nobody measures moves about ten times faster than the crop.
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Listen: https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.20/ep07.mp3
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Read online: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07.html
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CONVERSION DRILL 7 OF 12 — MILLIMETRES ↔ INCHES OF RAIN
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=======================================================
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Rule: 1 inch = 25.4 mm
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Fast method: inches → mm: ×25 (×100 then ÷4). mm → inches: ÷25 (÷100 then
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×4).
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* "1 to 3 inches across the Midwest" → 25 to 75 mm
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* 0.5 inch → 13 mm
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* 40 mm → 1.6 inches
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Why it matters: rainfall forecasts drive grain prices, and the two systems
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appear in the same conversation constantly.
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============================================================================
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SOLUTIONS BELOW — ANSWER FIRST
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============================================================================
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SOLUTIONS
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=========
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A1. The arithmetic first.
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Line Desk USDA (Aug)
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---------------------------------
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Carry-in 1,945 1,945
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Production 15,859 16,013
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Imports 25 25
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Total supply 17,829 17,983
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Domestic use 13,100 13,055
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Exports 3,350 3,275
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Total use 16,450 16,330
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Ending stocks 1,379 1,653
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Stocks-to-use 8.4% 10.1%
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All figures in million bushels. Production is 88.6 × 179.0 = 15,859. (USDA's
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published 16,013 is about 3 m bu above 88.6 × 180.7 — rounding in the
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acreage and yield they print. Worth noticing the first time you try to
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rebuild a published sheet and cannot make it tie.)
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Now the comparison the question is really asking for. The yields differ by
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1.7 bu, or 0.94%. The carryouts differ by 274 m bu, or 16.6%. That is a
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factor of roughly eighteen, not ten, and the extra leverage comes from the
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demand side: the desk is carrying 120 m bu more use than USDA. Decomposed,
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the 274 is 154 m of yield-and-rounding and 120 m of demand. The trap the
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question sets is the assumption that a carryout gap is a crop-view gap. Most
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of the time it is half a crop view and half a demand view, and only one of
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those two halves gets discussed on television.
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A2. Feed and residual absorbs it, and ending stocks falls 90 m bu — from
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1.653 to 1.563 bn, taking stocks-to-use from 10.1% to 9.6%. Nothing else in
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the sheet is allowed to move, because feed and residual is the line derived
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by subtraction.
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The two stories:
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1. Real demand. Livestock ate more than modelled — bigger herds, cheaper
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corn, better rations. This is a genuine tightening and it should
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+
persist into the next quarter.
|
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98
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+
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99
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+
2. Phantom supply. The crop was never as big as printed. The stocks survey
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100
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+
is measuring physical inventory, so if it comes in light, either use
|
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101
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+
was higher or production was overstated. A production overstatement
|
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gets revealed slowly, through the residual, quarter by quarter.
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103
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+
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The curve tells you which one the market believes. If the trade takes it as
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real, present demand is tighter now: the nearby month bids relative to the
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106
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+
deferred, spreads firm, and a carry market flattens or inverts. That is bull
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spreading, and it is a statement about physical availability. If the trade
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takes it as a statistical artefact likely to be revised away, flat price
|
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wobbles on the headline and the spreads do not move — the curve is saying
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110
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nobody is short of corn today. Flat price reacts to news. Spreads react to
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grain. A move in one without the other is the market telling you how much it
|
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believes.
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+
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A3. The surprise was 72 m bu, not the 159 m bu that the 1.8 bu/ac yield miss
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implies on 88.6 m acres. Half of it was absorbed on the way down the page by
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higher area and higher exports. In stocks-to-use terms the trade went in at
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1,725 ÷ 16,330 ≈ 10.6% and got 10.1% — about half a point of tightening.
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That is what the 20¼¢ paid for, and it is a reasonable price for it.
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+
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What happened afterwards was a different trade. Corn did not hold its gain
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and then add another six cents on Monday because of the report. It did so
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because Black Sea export capacity stayed impaired, because the eastern belt
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turned too wet, and because the whole complex was being pulled up by
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soybeans on Chinese demand. None of that was in the WASDE.
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125
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+
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So a trader long into the print was paid twice, for two separate reasons,
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and needed to be right about both to still be there on Monday. Being right
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about the report bought about a day. Staying long required an independent
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view on export capacity and August weather. The lazy reading — "bullish
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report, market up" — conflates an event that resolved in ninety seconds with
|
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a trend that has been running for two weeks. The discipline is to book the
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event P&L, then re-underwrite the position on the trend as a fresh decision.
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+
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A4. Exports fall, and the ethanol grind inside domestic use falls. Both are
|
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price-elastic on a timescale of weeks.
|
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136
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+
|
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+
* Exports are the fastest. US corn competes with Brazilian, Argentine and
|
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138
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Ukrainian corn at destination. A 70¢ rally is about $27.50/t; the buyer
|
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139
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+
simply calls another origin. This is ep 5's flow substitution, running
|
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on the demand line instead of the supply line.
|
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141
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+
|
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142
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* Ethanol grind is a margin, not a preference. The plant buys corn and
|
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sells ethanol and distillers grains. Corn up 70¢ with ethanol unchanged
|
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144
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compresses the crush, and marginal plants slow down. Demand stops
|
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145
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+
appearing at the bid.
|
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146
|
+
|
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147
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+
Feed is the third lever but the slowest and, right now, the furthest away:
|
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ep 6 put Chicago wheat about $54/t above its feed-switch level, so the
|
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149
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+
substitution bid is nowhere near being triggered.
|
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150
|
+
|
|
151
|
+
The inconsistency is this. A balance sheet is a set of quantities at an
|
|
152
|
+
assumed price. If you tighten stocks and let price rise, you must also let
|
|
153
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+
the demand lines respond, or you are counting the tightening twice. That
|
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154
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+
feedback is why carryout estimates converge rather than diverge: tighter
|
|
155
|
+
stocks lift price, higher price rations demand, rationed demand rebuilds
|
|
156
|
+
stocks. Rationing is not a metaphor — it is the arithmetic by which the
|
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157
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+
sheet closes at a higher price. The analyst's edge sits almost entirely in
|
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158
|
+
how fast and how far they think that response runs.
|
|
159
|
+
|
|
160
|
+
A5. For corn, very little is left. Pollination determines ear count and it
|
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161
|
+
is long finished; 76% dough and 4% mature means kernel number is set and the
|
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162
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+
crop is filling. What remains is test weight, late-season disease, and an
|
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163
|
+
early frost risk that is still weeks away and low-probability. The weather
|
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164
|
+
premium has largely decayed, exactly as ep 6 described, and it decayed
|
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165
|
+
whether or not the forecast improved.
|
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166
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+
|
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167
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+
For soybeans, the crop is genuinely still open. Beans set pods and fill seed
|
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168
|
+
through August, so August rainfall and August heat still move the yield.
|
|
169
|
+
With 85% setting pods, a rating of 61% good to excellent and seven points of
|
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170
|
+
deterioration against last year, there is a real distribution left to price.
|
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171
|
+
|
|
172
|
+
You would rather own the beans — and Monday's tape is the evidence: beans
|
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173
|
+
+23½¢ against corn +6¼¢ on the same weather map. The sharper version of the
|
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174
|
+
answer is that you would rather own optionality on beans than futures,
|
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175
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+
because the same decay clock that has already emptied the corn premium is
|
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176
|
+
running on the bean premium too, and it accelerates from early September. A
|
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177
|
+
long call spread pays for the distribution without paying carry to the
|
|
178
|
+
calendar.
|
|
179
|
+
|
|
180
|
+
A6. Two different risks, and the question is whether you can tell them apart
|
|
181
|
+
under pressure.
|
|
182
|
+
|
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183
|
+
* Voyage risk passed to the buyer at the ship's rail in Santos. A typhoon
|
|
184
|
+
diversion mid-ocean is the buyer's risk of loss, not yours. Under CFR
|
|
185
|
+
you contracted the freight, so a late vessel is your dispute with the
|
|
186
|
+
carrier under the charter party — but it does not move cargo risk back
|
|
187
|
+
onto your book.
|
|
188
|
+
|
|
189
|
+
* Documentary risk is entirely yours, and it is the live one. A letter of
|
|
190
|
+
credit is a bank's undertaking to pay against conforming documents
|
|
191
|
+
presented before expiry. Miss the expiry and the undertaking lapses. You
|
|
192
|
+
are then an unsecured creditor of the buyer, holding a cargo already at
|
|
193
|
+
their risk, in a market where they may prefer to renegotiate.
|
|
194
|
+
|
|
195
|
+
The documentary risk is what threatens the P&L. Nothing has happened to the
|
|
196
|
+
beans. The practical moves are to request an L/C amendment extending expiry
|
|
197
|
+
and the latest shipment date before it lapses rather than after, to present
|
|
198
|
+
documents early if the bill of lading and quality certificate are already in
|
|
199
|
+
hand, or to ship documents against a letter of indemnity if originals are
|
|
200
|
+
chasing the vessel. Ep 4's point restated: the cargo is fine, and the paper
|
|
201
|
+
is what pays.
|
|
202
|
+
|
|
203
|
+
A7. Convert first. 60,000 t × 36.744 bu/t = 2,204,640 bu. At 1216 c/bu the
|
|
204
|
+
cargo is worth $26.81 m.
|
|
205
|
+
|
|
206
|
+
Line Value
|
|
207
|
+
-------------------------------------------
|
|
208
|
+
Cargo 2,204,640 bu
|
|
209
|
+
Cargo value at 1216 c/bu $26,808,422
|
|
210
|
+
Demurrage, 3 days × $26,500 $79,500
|
|
211
|
+
Demurrage in c/bu 3.6 c/bu
|
|
212
|
+
Demurrage as % of cargo value 0.30%
|
|
213
|
+
|
|
214
|
+
Desks quote it in cents per bushel because that is the same unit as the
|
|
215
|
+
margin. A cargo bought at "November minus 20" and hit with 3.6 cents of
|
|
216
|
+
demurrage was really bought at minus 23.6. In dollars, $79,500 against $26.8
|
|
217
|
+
m looks like a rounding error and gets waved through. In cents per bushel it
|
|
218
|
+
sits next to the differential that the entire trade was argued over, and 3.6
|
|
219
|
+
cents is a fifth of the twenty. Execution costs only become visible when
|
|
220
|
+
they are expressed in the unit the trader negotiates in — which is why the
|
|
221
|
+
execution desk reports in cents, not in invoices.
|
|
222
|
+
|
|
223
|
+
A8 — Conversion drill answer. 82 mm ÷ 25.4 = 3.23 inches. 0.35 inch × 25.4 =
|
|
224
|
+
8.9 mm. The fast method gets you close enough to trade on: 82 ÷ 100 × 4 =
|
|
225
|
+
3.28, and 0.35 × 100 ÷ 4 = 8.75.
|
|
226
|
+
|
|
227
|
+
The 82 mm is the number that matters this week. Excessive rain across the
|
|
228
|
+
eastern Corn Belt in mid-August, with corn 76% at dough and beans 85%
|
|
229
|
+
setting pods, brings lodging and disease pressure into crops that are
|
|
230
|
+
filling, and it is behind the one-point slip in both condition ratings on
|
|
231
|
+
Monday. It lands on the yield term of production, on the supply side of the
|
|
232
|
+
2026/27 sheet.
|
|
233
|
+
|
|
234
|
+
The 8.9 mm in western Kansas is a soil-moisture story for hard red winter
|
|
235
|
+
seeding in September. It reaches a balance sheet too — but the 2027/28 one,
|
|
236
|
+
through planted area and abandonment. Same week, two rainfall figures, two
|
|
237
|
+
different marketing years. Keeping them apart is most of the skill.
|
|
238
|
+
|
|
239
|
+
Written edition
|
|
240
|
+
---------------
|
|
241
|
+
|
|
242
|
+
A balance sheet is one page. Supply on top, demand underneath, and what is
|
|
243
|
+
left over at the bottom. It is not a forecast and it is not a model. It is
|
|
244
|
+
an accounting identity, and it has to close.
|
|
245
|
+
|
|
246
|
+
Supply is three lines.
|
|
247
|
+
|
|
248
|
+
Line What it is
|
|
249
|
+
--------------------------------------------------------------------------
|
|
250
|
+
Carry-in What was still in store when the previous marketing year ended
|
|
251
|
+
Production Harvested acres × yield per harvested acre
|
|
252
|
+
Imports For US corn, a rounding error
|
|
253
|
+
|
|
254
|
+
Two things in that table are quietly load-bearing. A marketing year is the
|
|
255
|
+
crop's own calendar, not the accountant's: US corn and soybeans run
|
|
256
|
+
September to August, US wheat June to May. And production uses harvested
|
|
257
|
+
acres, not planted. Around 8 million planted US corn acres never get cut for
|
|
258
|
+
grain in a normal year.
|
|
259
|
+
|
|
260
|
+
Demand is four lines: feed and residual, ethanol, food/seed/industrial, and
|
|
261
|
+
exports. Then ending stocks, which is total supply minus total use.
|
|
262
|
+
|
|
263
|
+
Ending stocks is not measured. It is what is left.
|
|
264
|
+
|
|
265
|
+
The August numbers, in million bushels.
|
|
266
|
+
|
|
267
|
+
2026/27 US corn
|
|
268
|
+
-----------------------------------------------------
|
|
269
|
+
Carry-in 1,945
|
|
270
|
+
Production (88.6 m ac × 180.7 bu/ac) 16,013
|
|
271
|
+
Imports 25
|
|
272
|
+
Total supply 17,983
|
|
273
|
+
Domestic use 13,055
|
|
274
|
+
Exports 3,275
|
|
275
|
+
Total use 16,330
|
|
276
|
+
Ending stocks 1,653
|
|
277
|
+
Stocks-to-use 10.1%
|
|
278
|
+
|
|
279
|
+
[chart] US corn 2026/27, supply down to carryout — Ending stocks is the
|
|
280
|
+
difference between two numbers that are both around sixteen billion.
|
|
281
|
+
That is what makes it move so much. — USDA WASDE, 12 August 2026.
|
|
282
|
+
Carry-in is the figure implied by the published stocks and use. —
|
|
283
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-
|
|
284
|
+
desk-daily/ep07_chart1.png
|
|
285
|
+
|
|
286
|
+
Stocks-to-use is the number a desk quotes out loud, because a bushel figure
|
|
287
|
+
means nothing without the size of the market next to it. 1,653 over 16,330
|
|
288
|
+
is 10.1%.
|
|
289
|
+
|
|
290
|
+
Look at the size of the terms. Production is 16.0 billion bushels. Ending
|
|
291
|
+
stocks is 1.65 billion. Production is roughly ten times the line it feeds.
|
|
292
|
+
|
|
293
|
+
So a 1% error in the crop is a 10% error in the carryout.
|
|
294
|
+
|
|
295
|
+
Take the yield down two bushels, from 180.7 to 178.7. That is 1.1% on the
|
|
296
|
+
yield line. On 88.6 million harvested acres it is 177 million bushels of
|
|
297
|
+
production.
|
|
298
|
+
|
|
299
|
+
Yield (bu/ac) Production Ending stocks Stocks-to-use
|
|
300
|
+
-------------------------------------------------------
|
|
301
|
+
178.7 15,836 1,476 9.0%
|
|
302
|
+
180.7 (USDA) 16,013 1,653 10.1%
|
|
303
|
+
182.7 16,190 1,830 11.2%
|
|
304
|
+
|
|
305
|
+
[chart] Two bushels of yield, eleven percent of carryout — A 1.1% change in
|
|
306
|
+
the yield input moves ending stocks by about 11% in either
|
|
307
|
+
direction. The balance sheet is a lever, and the fulcrum sits very
|
|
308
|
+
close to the crop. — Calculated on the August 2026 WASDE sheet,
|
|
309
|
+
holding demand and area constant at 88.6 m harvested acres. —
|
|
310
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-
|
|
311
|
+
desk-daily/ep07_chart2.png
|
|
312
|
+
|
|
313
|
+
Eleven percent either way, out of a one percent input. That is the whole
|
|
314
|
+
reason a yield estimate is worth arguing about for six weeks.
|
|
315
|
+
|
|
316
|
+
A warning about that table, though. It holds demand fixed, and a real
|
|
317
|
+
balance sheet does not. A sheet is a set of quantities at an assumed price.
|
|
318
|
+
Cut the crop, lift the price, and exports and ethanol grind both start to
|
|
319
|
+
fall — which rebuilds part of the stocks you just removed. Rationing is not
|
|
320
|
+
a metaphor. It is the arithmetic by which the sheet closes at a higher
|
|
321
|
+
price.
|
|
322
|
+
|
|
323
|
+
The relationship between stocks-to-use and price is not a line. It is a
|
|
324
|
+
curve, and it bends.
|
|
325
|
+
|
|
326
|
+
From 15% down to 12%, price barely notices. There is plenty of corn either
|
|
327
|
+
way and the marginal bushel is not scarce. From 10% down to 8%, price goes
|
|
328
|
+
vertical, because at that level somebody has to be rationed out of the
|
|
329
|
+
market and price is the only tool that does it.
|
|
330
|
+
|
|
331
|
+
Which means the same two-bushel yield move is worth almost nothing at a
|
|
332
|
+
comfortable stocks-to-use and an enormous amount at a tight one. At 10.1%,
|
|
333
|
+
corn is close enough to the bend that the market is paying attention — and
|
|
334
|
+
that, rather than the headline figure, is why an August yield print gets
|
|
335
|
+
traded as hard as it does.
|
|
336
|
+
|
|
337
|
+
Feed and residual. Two words, and the second is doing real work.
|
|
338
|
+
|
|
339
|
+
Nobody counts the corn a hog eats. Feed use is inferred: take the quarterly
|
|
340
|
+
Grain Stocks survey, subtract everything that can actually be measured, and
|
|
341
|
+
whatever remains gets called feed and residual. So every measurement error
|
|
342
|
+
in the sheet — in production, in exports, in the survey itself — lands in
|
|
343
|
+
that one line.
|
|
344
|
+
|
|
345
|
+
Which means that when feed and residual moves, sometimes it is telling you
|
|
346
|
+
about livestock, and sometimes it is telling you the crop was never the size
|
|
347
|
+
they said it was.
|
|
348
|
+
|
|
349
|
+
Ending stocks is a residual. Feed and residual is a residual sitting inside
|
|
350
|
+
it.
|
|
351
|
+
|
|
352
|
+
Here is what the argument sounds like the morning before a report.
|
|
353
|
+
|
|
354
|
+
| Analyst: I have got carryout at one six eight.
|
|
355
|
+
|
|
356
|
+
| Trader: On what yield?
|
|
357
|
+
|
|
358
|
+
| Analyst: One eighty-one. Same as theirs.
|
|
359
|
+
|
|
360
|
+
| Trader: Then where are we actually different?
|
|
361
|
+
|
|
362
|
+
| Analyst: Exports. You are carrying three three, I am at three two.
|
|
363
|
+
|
|
364
|
+
| Trader: A hundred million bushels of Mexico. That is not a crop view,
|
|
365
|
+
| that is a freight view.
|
|
366
|
+
|
|
367
|
+
Notice where the disagreement sat. Not the yield — they agreed on the yield.
|
|
368
|
+
|
|
369
|
+
That is the pattern, and it has a structural cause. Supply is surveyed.
|
|
370
|
+
Fields are walked, ears are counted, acres are measured from satellite
|
|
371
|
+
imagery and from farm programme filings. Two analysts working from the same
|
|
372
|
+
surveys land close together.
|
|
373
|
+
|
|
374
|
+
Demand is inferred. Nobody surveys a feedlot's intentions. Export
|
|
375
|
+
commitments are known, but shipment timing is a decision somebody else has
|
|
376
|
+
not made yet — which is precisely what the Chinese soybean programme is
|
|
377
|
+
demonstrating this month.
|
|
378
|
+
|
|
379
|
+
So two competent analysts converge on supply and diverge on demand. Which is
|
|
380
|
+
why the interesting positions ahead of a report are rarely outright: a
|
|
381
|
+
demand view is a view about when and where, and that lives in spreads.
|
|
382
|
+
|
|
383
|
+
On 12 August USDA cut the corn yield to 180.7 bu/ac. The trade average going
|
|
384
|
+
in was 182.5. So the yield surprise was 1.8 bushels — 159 million bushels of
|
|
385
|
+
production, gone.
|
|
386
|
+
|
|
387
|
+
And the carryout printed only about 72 million below what the trade was
|
|
388
|
+
carrying.
|
|
389
|
+
|
|
390
|
+
Line Effect
|
|
391
|
+
-------------------------------------------------
|
|
392
|
+
Yield surprise, −1.8 bu/ac × 88.6 m ac −159 m bu
|
|
393
|
+
Area and demand revisions +87 m bu
|
|
394
|
+
Carryout surprise −72 m bu
|
|
395
|
+
|
|
396
|
+
Half the surprise disappeared on the way down the page. This is the trap
|
|
397
|
+
that catches anyone who trades one line: the market does not price the
|
|
398
|
+
yield, it prices the carryout, and the carryout has an area term, a demand
|
|
399
|
+
term and a carry-in term, any of which can pay for a bad yield.
|
|
400
|
+
|
|
401
|
+
December corn added roughly 20¼¢ on the print. It then did not hand it back
|
|
402
|
+
— it closed Monday 17 August at 489½, above its report-day close. But that
|
|
403
|
+
was a different trade. The follow-through came from impaired Black Sea
|
|
404
|
+
export capacity, a soaked eastern belt and a soybean complex pulling the
|
|
405
|
+
whole board higher on Chinese buying. None of it was in the report.
|
|
406
|
+
|
|
407
|
+
Which is the last honest thing to say about report days. The number is the
|
|
408
|
+
shock. The market is what happens over the next three weeks, and it needs
|
|
409
|
+
its own reason.
|
|
410
|
+
|
|
411
|
+
|
|
412
|
+
----------------------------------------------------------------------------
|
|
413
|
+
Soft Commodity Trading — a daily briefing on physical commodity trading.
|
|
414
|
+
|
|
415
|
+
GLOSSARY
|
|
416
|
+
Every unit and expression the show has introduced lives on the episode page:
|
|
417
|
+
https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/ep07.html#glossary
|
|
418
|
+
|
|
419
|
+
All episodes: https://storage.googleapis.com/podcast-audio-2647223968/index.html
|
|
420
|
+
RSS: https://storage.googleapis.com/podcast-audio-2647223968/commodity-desk-daily/feed.xml
|