While most traders were likely expecting only minimal changes to yield and production on the January World Agricultural Supply and Demand Estimates (WASDE) report, the fact that corn yield and production both scored record highs, and that the report also featured a similar rise in soybean yield and production, resulted in both markets falling sharply. Wheat markets were able to stave off the bearish attitude to some degree as winter wheat seedings plunged by a much larger than expected 2.4 million acres (ma), and ending stocks fell.
CORN
USDA always seems to surprise us, and this season's final crop production and quarterly stocks report was no exception. With the Dow Jones pre-report survey looking for corn production to fall by just 13 million bushels (mb) to 15.221 billion bushels (bb), and corn yield to remain unchanged at 174.9 bushels per acre (bpa), the corn yield rose to a record-large 177.3 bpa, with production also a record-large 15.34 bb. That was achieved despite a cut of 700,000 acres on harvested acres to 86.5 ma. To offset some of the extra supply, USDA did adjust demand higher, with corn for ethanol use bumped up 50 mb to account for the 5% higher yearly ethanol production, and feed and residual moved up by 25 mb. Also weighing on the corn market was the higher-than-expected increase of Dec. 1 stocks to 12.169 bb, the largest since 2018, and the 31 mb increase in corn ending stocks to 2.162 bb. On another note, both corn plant population per acre and ears per acre rose sharply from the previous year, to 29,550 and 29,350, respectively.
More bearish news came on the world side, with world ending stocks rising 10 million metric tons (mmt) above December, and was more than 11 mmt (433 mb) higher than trade expectations. Much of the reason for the world stocks surprise can be attributed to China, where production rose by 11.8 mmt to 288.8 mmt (11.4 bb). In other changes, China feed use of corn rose by 2 mmt, and China's ending stocks rose by 2 mmt to 211.8 mmt (8.34 bb). Brazil's corn crop fell by a lower-than-expected 2 mmt to 127 mmt (5 bb). This number is still nearly 10 mmt above the CONAB estimate of 117.6 mmt (4.63 bb). Brazil exports were decreased by 1 mmt to 54 mmt (2.12 bb), and EU feed use dropped by 1 mmt to 58.3 mmt (2.29 bb).
March corn futures were trading down 3 cents prior to the report and ended up closing 10 3/4 cents lower to $4.47 after setting a new low of $4.41 early in the session.
SOYBEANS
Although USDA's soybean data on the January WASDE report was not quite as newsworthy, it was still a surprise, with soybean yield and production also rising above the average pre-report estimate. Soybean yield, expected to rise modestly, finished 0.7 bpa higher at 50.6 bpa, while production also rose above the high side of expectations at 4.165 bb. That figured to be about 42 mb above trade expectations. As in corn, harvested acres fell, but only by 400,000 to 82.4 million acres. Adding to the bearish surprise was a rise in Dec. 1 soy stocks to 3 bb, and about 18 mb higher than the average trade estimate. Unlike corn, there were no changes to the soybean balance sheet to offset higher production. That resulted in the U.S. soy ending stocks rising to 280 mb, and 41 mb above where traders had expected, and 35 mb above the December estimate.
World changes on soybeans were more minor than traders had expected. Brazil's soy crop was lowered by 4 mmt to 157 mmt (5.77 bb), but that is still some 5 to 6 mmt (220 mb) higher than some other private estimates. Offsetting part of the Brazil loss was an increase in Argentina's soy crop by 2 mmt to 54 mmt (1.98 bb). Paraguay's soy crop increased by a modest 300,000 mt to 10.3 mmt (378 mb). There were some other minor changes resulting in a higher world ending stocks number than the trade had anticipated. Ending stocks rose to 114.6 mmt (4.21 bb) from 114.2 mmt in December, and that figured 2.6 mmt higher than the average trade estimate.
March soybeans were trading close to unchanged prior to the report release, and March ended up finishing 12 1/4 cents lower after first testing the $12.00 area.
WHEAT
Wheat surprises on the domestic balance sheet were not expected to be significant, with ending stocks expected to decline by 1 mb. Ending stocks were in fact reduced by 11 mb to 647 mb to reflect lower June 1 stocks on the NASS grains report with seed use falling by 1 mb. Dec. 1 wheat stocks were revealed at 1.410 bb, and that figured about 28 mb higher than the average trade guess, and nearly 100 mb higher than a year ago.
The winter wheat seeding report was instrumental in keeping wheat from selling off with the row crops. The all-winter wheat seeding number came in at 34.4 million acres, down about 2.3 million acres from last year and 1.5 million acres under the average trade estimate. Hard red winter seedings fell by 1.7 ma, with soft red down 500,000 acres to 6.86 ma.
World changes in wheat were modest. The wheat crops from Russia and Ukraine were increased by 1 mmt and .9 mmt, respectively, to 91 mmt (3.34 bb) and 23.4 mmt (860 mb). Russian exports were raised by 1 mmt, while Ukraine exports were increased by 1.5 mmt to 14 mmt (514 mb). EU wheat imports rose by 2.5 mmt and EU exports were reduced by 1 mmt. Aussie and Canadian wheat exports rose by 500,000 mt each. India's feed use was dropped by 1.25 mmt to 6.75 mmt (248 mb). The net effect of all these changes was a 260 mmt (9.55 bb) ending world stocks number, and that is about 1.8 mmt higher than in December.
Wheat was trading slightly lower ahead of the report and finished modestly lower, weakened by higher Dec. 1 stocks, and supported by the fall in seeding.
FINAL THOUGHTS
The January WASDE figured to be bearish both corn and soybeans on higher, yield, production and stocks, and spot corn fell by 10 3/4, with spot beans off 12 1/4. Kansas City wheat was able to hold off the sellers, finishing just 3/4 cents lower.
The ability of corn to withstand weather issues early in the crop year to finish with record yields and production was amazing. Soybeans also went through some tough weather on the way to a near-record crop. The modest revisions in Brazilian soy and corn production will no doubt continue to be questioned, with perhaps more revisions ahead. The market will now likely focus its attention on South American weather again.
Dana Mantini can be reached at dana.mantini@dtn.com
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