Bearish corn, though demand likely understated:The USDA presented a broadly bearish picture of theUS corn balance today, pegging US 11/12ending stocksat 866mln bu, above consensus of 804mln bu andleaving S/U at 6.8%. The USDA lowered productionestimates (down 64mln bu to 12.4bln bu, belowconsensus of 12.5bln bu) on planted acreage down400k MoM and yields flat at 148.1bu/ acre. Exports areseen down 50mln bu this month to 1.60bln bu (wecurrently model 1.55bln bu) on greater competition fromUkrainian corn. However, more surprising to us was thedecision to keep 11/12US feed and residual demandunchanged at 4.7bln bu, despite lower wheat feeddemand, higher 11/12corn beginning stocks, and theabsence of demand-rationing prices. Since July, theUSDA has taken down feed and residual demand byaround 500mln bu, assuming demand rationing fromcorn prices above $7.00/ bu. With feeding and ethanolmargins still squarely positive at today’s prices, we donot currently believe that incentive to ration demand is inplace and we continue to see upside to feed andresidual demand — which we model at 4.95bln bu.

　　Neutral soybeans on lower production, exports: TheUSDA lowered 11/12US production 25mln bu to 3.06bln bu, (below consensus of 3.10bln bu), with yieldsseen down 0.3bu/ acre MoM at 41.5bu/ acre. Whileestimates of seed and residual demand lifted USdomestic consumption (up 9mln bu to 120mln bu), itwas more than offset by a decrease in exports (down 40mln bu to 1.4bln bu). As a result, US 10/11S/U wasrevised down from 5.2% to 5.1%, below the 5.9%implied by consensus but still above our estimate of5.0%. Lower 10/11crush demand, primarily out of Braziland Argentina is seen raising global 11/12beginningstocks by nearly 0.5mln MT with lower 11/12crushdemand out of Japan and Mexico expected to raiseworld 11/12ending stocks to 63.0mln MT and S/U to aslightly more comfortable 24.1%.

　　Bearish wheat on more comfortable world and US balances: The USDA raised US 11/12ending stocks by 76mln bu (taking11/12US S/U to a comfortable 38.9%) as 80mln bu less feed demand and exports lower by 50mln bu more than offset a 69mln budecline in production estimates (reflecting the Sep 30Small Grains report). Despite lower implied feed demand in the quarterly stocksreport, we are surprised by the magnitude of the USDA’s write-down to feed estimates, down 80mln bu MoM, particularly given nochange to corn feed demand. The global balance is also seen looser this month on higher supply and lower feed consumption,bringing 11/12global S/U up to 30%. Production estimates for the FSU and Kazakhstan were raised by 3mln MT each, accompaniedby higher exports by 1.5mln MT and 1mln MT, respectively. Russian exports also increased by 2mln MT, at the expense of lowerdomestic feed of the same quantity.

　　Bearish cotton on lower US exports and higher global supply. US 11/12ending stocks are seen 0.6mln bales higher MoM onmodestly higher US output and a 0.8mln bale reduction in export demand, bringing S/U up to a comfortable 25.5%. Globally, theUSDA also sees higher 11/12ending stocks on larger supplies and lower consumption. World 11/12production was raised by 1.2mlnbales, as increases in Australia, India, Brazil, and Pakistan more than offset a 0.5mln bale reduction in China. With China’s 11/12domestic consumption lowered by 0.5mln bales MoM, world trade is reduced by ~0.8mln bales from the Sep WASDE.