The November WASDE Report was neutral to bullish for the grain sector. The bullish drop in soybean yield was the biggest surprise and USDA lowered yield by 0.3 bushels per acre (bpa) to 51.2 (bpa), which was also below trade estimates. Lower yields in Indiana, Iowa, Ohio, and Kansas account for most of the change in production.
Jim McCormick with Agmarket.net says he wasn’t surprised by the drop in yield due to the lagging soybean harvest in the eastern corn belt where they’ve received too much rain which has shaved off bushels in key production areas due to shattering losses. He says, “Indiana saw the biggest cut by 5 bushels, while Ohio was down 3 bushels and that offset some yield increases in the western corn belt.”
The lower yield resulted in a 23 (mb) drop in production to 4.425 billion bushels (bb). However, ending stocks were raised from last month by 20 (mb) to 340 (mb) largely as a result of a 40 (mb) cut in exports. The export reduction reflected reduced global imports and lower than expected shipments through October. McCormick says, “The big debate now will be whether or not USDA needs to cut exports even more in the January report because of the slow pace of exports to China as their demand has slowed down and they are buying beans from Brazil instead of the U.S.”
World ending stocks for soybeans were down .8 million metric tons (mmt) from October at 103.8 (mmt).
For corn, USDA raised yield by 0.5 (bpa) to a record 177.0 (bpa) and that pushed production up to 15.062 (bb), which is a 43 (mb) increase from last month. USDA left exports unchanged, but corn used for ethanol production was raised by 50 (mb) to 5.25 billion. So, that resulted in slightly lower U.S. ending stocks at 1.493 (bb). McCormick thinks that ending stocks number is the largest the trade will see for the year though as ethanol margins are strong and will continue to increase the demand for corn.
World corn ending stocks, however, were increased by 2.7 (mmt) to 304.4 (mmt) which was well above trade expectations.
Domestic ending stocks of wheat were raised to 583 (mb), up 3 million from last month’s forecast but still the lowest U.S. ending stocks in 14 years. Global ending stocks were again lowered by 1.4 (mmt) to 275.8 (mmt), with Australia, the EU and India accounting for most of the reduction. McCormick expects the tight global supplies to support prices. “I think with the global tightness all three wheat classes could retest the recent contract highs,” he says.
