US Crops Slightly Higher, But US/China Trade Deal Offers Support

Market Analysis

2019’s US January crop and December stocks updates again provided some market twists and turns. Instead of declines in outputs & yields, the USDA lower harvested corn & bean areas and raised yields resulting in slightly larger crops. However, the USDA’s corn ending stocks were down slightly while soybeans were steady vs. December. 2020’s initial US winter wheat seedings also had a twist. US plantings were down 355,000 acres, but this level was 140,000 above the trade estimate (3rd time in 36 years). A sharp jump in SE SRW seedings countered hefty drops in the N Plains & Midwest.

Corn’s US yield was upped by 1.0 bu. to 168 bu. vs. the trade’s 0.8 bu decline. However, the USDA sliced 2019’s harvested area by 333,000 acres resulting in 13.69 billion bu.crop (a 31 million bu. rise.), Last fall’s cold/wet Midwest weather trapping northern fields in snow prompted the USDA to announce 5 states (ND, SD, MN, WI & MI) would be resurveyed in the spring. However, corn yields were upped 2-6 bu, in IL, IN, MN, WI & IA from Nov this month. A 107 million bu increase in 2018/19’s ending stocks & a 548 million bu. smaller Dec. 1 corn stocks (122 million bu below the trade) were corn’s big surprise numbers. These levels project a record 2.63 billion bu. fall feed/residual disappearance. This prompted the USDA to up its feed demand by 250 million to 5.525 billion bu. resulting in only an 18 million drop in corn’s ending stocks to 1.892 billion bu.

2019’s US soybean crop was upped by 8 million bu. to 3.558 billion last week when the US yield was increased by 0.5 bu. to 47.4 bu. However, late plantings & poor weather lower last year’s harvested area by 605,000 acres curtailing the ECB’s higher yields. Last week’s Dec 1 stocks at 3.252 billion bu, were slightly higher than the trade, but sharply lower than 2018’s 3.746 billion level. The re-survey & the potential for higher Chinese US bean buys have the trade thinking a smaller US soybean ending stocks. 

What’s Ahead:

The signing of the US/China trade deal this week is a positive for US export sales. However, its impact maybe more intermediate to longer-term. Given South American competition and limited crop concerns, moving up sale 10-15% on March strength to $3.98-$4.02 in corn, $9.65-$9.80 in soybeans and $5.78-$5.95 in Chicago wheat seems appropriate levels if they occur near-term.