December US/World S&D Reports

Market Analysis

The USDA followed its traditional December approach after last month’s dramatic US supply/demand changes. The World Board made some modest soybean and wheat demand updates while leaving corn’s balance sheet unchanged from last month. Given the trade’s enthusiasm going into this month’s report, the corn and bean markets were a bit disappointed that this year’s ending stocks weren’t reduced by pre-report expectations. This was not the case for wheat however when both the US and World ending stocks were reduced by the USDA. South American weather and Russian/Chinese agricultural news will now likely be the market’s focus.

October’s record US soybean crush did prompt the World Board to up its domestic demand by 15 million bu to 2.105 billion this month. However, the USDA was more cautious in their overseas demand leaving it unchanged despite sales being 88% of the USDA forecast. The lack of recent Chinese buying and the uncertainty of January’s final crop size could have been factors. However, this month’s stock/use ratio is 3.9%, the lowest since 2013/14’s 2.6% level.

The USDA continued its measured approach in their US corn supply/demand update. Even with exports substantially ahead (59% of yearly outlook), 2020/21’s USDA forecast is 212 million bu. higher than any previously states yearly export shipments. The current surge in coronavirus infections and no quarterly stocks report until next month also left ethanol & feed demand unchanged. The size of January’s final US crop and impact of La Nina on S. America’s corn output (Argentina sliced 1 mmt) remain major market factors going into 2021.

The USDA’s unexpected decline in world wheat stocks by 4 mmt (China’s feed demand up 3 mmt and Australia’s crop up just 1.5 mmt to 30 mmt) along with a 10 million bu. increase in US exports were positives from December’s report. The USDA also slipped US imports by 5 million bu resulting in 862 million bu. 2020/21 ending stocks. However, reports that Russia was considering instituting a 2021 export quota and imposing a hefty wheat export tax to combat rising food inflation were also factors in this food grain’s strength.

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Disclaimer: The information contained in this report reflects the opinion of the author and should not be interpreted in any way to represent the thoughts of any futures brokerage firm or its ...

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