Market Analysis

The USDA’s January reports provided some surprises again this year. Instead of hefty output jumps that were whispered within the trade this past week, both corn and soybeans had modest 2017/18 production changes on their final crop reports. Both crops didn’t have any big ending stock changes either. US wheat producers provided the biggest surprise when they reported 1.5 million higher wheat seedings than the trade’s estimate. This is only the 2^nd time in 30 years the USDA’s survey was substantially above the trade’s median and range. We’ll cover this important change in a separate report.

Corn’s final US yield did rise by 1.2 bu. to 176.6 bu. from November, but the USDA also cut its harvested area by 416,000 acres (mostly in Midwest) resulting in just a 26 million bu. increase to a 14.6 billion bu. crop. 2017’s strong yields came from the eastern US, led by the ECB up 5.2 bu. to 185 and the SE region being up

14.3 bu. to 147.9 bu boosting this year’s national yield by 2 bu. Last fall’s December 1 stocks of 12.516 billion bu. were 85 million higher than expected. Given export and ethanol usage being known, this suggests last fall’s feed level was a very modest 1.1% higher (25 million) at 2.3 billion bu. than last year. This prompted 25 million sliced from feed usage, but overall the US ending stocks rose just 40 million to 2.477 billion bu.

The USDA did lower the US bean crop by 33 million to

4.392 billion bu. last week when the yield was reduced by

0.4 bu. to 49.1 bu. Yields were slightly lower across most regions of the US except in the Delta. Last week’s Dec 1 stocks were 24 million lower than expected, despite heavy rumors of 100 million cut in soybean exports because of slow sales vs. last year. Instead, the USDA cut exports by 65 million and upped the crush by 10 million bu., resulting in 470 million revised stocks vs. whispers of mid-500 level that pressured beans all week.

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What’s Ahead

After being pressured all week, soybeans bounced late because of the modest rise of its ending stocks and short-covering ahead of the 3-day weekend. Wheat’s limited WW seeding cut hung over it and the corn market, but ongoing SW dryness makes 2018 harvested area iffy. The trade’s focus will now be switching to S. America’s weather. March swings to $9.73-$9.85 should be used for 10% sales for cash needs.