The January Crop Production, World Agricultural Supply and Demand Estimates (WASDE), Quarterly Stocks and Winter Wheat Seedings reports, held several bullish surprises for the market.
The biggest was a cut in the national average corn yield by 3.8 bushels per acre (bpa) to 172 bpa. That resulted in a 324 million bushel (mb) drop in production to 14.182 billion bushels (bb). USDA did lower usage to offset some of the lower production figure, with a 100 mb drop in exports, 100 mb cut in corn for ethanol and 50 mb drop in feed and residual use. So, ending stocks were lowered just 150 mb to 1.552 bb. However, Jim McCormick with AgMarket.Net, says that puts the stocks to use ratio at 10.6%, which warrants corn prices above $5. Quarterly stocks were also estimated at 11.64 bb, which was nearly 630 mb below the average trade guess, but nearly even with a year ago.
Corn production in Argentina was lowered 1.5 million metric tons (mmt) to 47.5 mmt and Brazilian production dropped just 1 mmt to 109 mmt. McCormick says production needs to be lowered more than that in the future with the dryness concerns in Argentina. World stocks were lowered by 5.2 mmt to 283.8.
The bulls were also fed in the soybean market with a .5 bpa drop in national yield to 50.2 bpa, which lowered production by 35 million bushels. Most of that drop came in Minnesota, Iowa and Kansas. Ending stocks were also lowered by 35 mb to 140 mb with a 5 mb increase in crush and 30 mb hike in exports, offset by a 20 mb increase in imports. McCormick says that puts the stocks to use ratio down around 3% and warrants soybean prices in the $14 to $15 range. He also thinks the market is already trading around a 100 mb stocks figure. “However, I don’t think USDA will lower their forecast down to that level until the May report,” he states. Quarterly stocks were also down from a year ago by 319 mb at 2.93 bb.
South American production was also eyed by the trade and Argentina production was lowered by 2 mmt to 48 mmt. However, USDA surprisingly left Brazilian production unchanged at 133 mmt, which McCormick thinks will have to be adjusted lower in the future. World soybean stocks also dropped 1.3 mmt to 84.3 mmt.
Wheat also had some positive news in the report with domestic carryover dropping by 26 mb from the December report to 836 mb, which was below average trade guesses. Quarterly stocks were also 167 mb below last year and world carryover was also down 3.3 mmt at 313.2 mmt.
All winter wheat acreage was pegged by USDA at 31.99 million acres (ma), which is up 1.58 ma from a year ago. Of that, farmers planted 22.3 ma to hard red winter wheat, which was up nearly 1 ma from 2020. McCormick thinks that plantings number will drop going forward as some of the poor hard red winter wheat crop is destroyed and planted to row crops. Winter wheat production was unchanged at 1.825 bb.
