Market Analysis

The USDA’s January US crop, stocks & supply/demand reports provided surprises to the markets again this year. Instead of modest declines in corn and soybean outputs, corn’s final yield and crop size was dropped sharply and below the trade’s lowest estimate. Despite S. America’s dry weather conditions, the USDA only decreased Argentina’s crop by 2 mmt and kept Brazil’s outlook unchanged. Also, this year’s US winter wheat seedings were 462,000 acres above the trade’s average at 32 million acres and the first increase in US plantings since the 2013 report.
This year’s final corn yield was cut by 3.8 bu to 172 bu/acre which decreased the US crop size by 325 million bu to 14.182 billion bu. Late season dryness & low seed moisture cut yields across the Midwest from IA (off 6 bu), NE (-4), MN (-10), MO (-10), WI (-10), SD (-3) IL (-3) to IN (-2 bu) vs. November’s levels. However, this month’s US end-ing stocks dipped only 150 million to 1.552 bil. bu. A 75 million dropped in last year’s ending stocks along with 100 million decreases in ethanol & exports plus a 50 million drop in feed demand were the changes that produced the USDA’s modest stocks change vs corn’s lower output. Of note, the USDA’s quarterly stocks estimate of 13.332 billion bu. projects a fall US feed demand level of 2.758 billion bu, a 134 million higher quarterly disappearance than last year. This counter’s the USDA’s lower yearly feed demand cut.
The US January soybean crop was lower by 35 million bu to 4.135 billion bu. The northern & western areas of the US Bean Belt posted lower yields. The Eastern Midwest & the Mid-South had steady to slightly higher yields vs November resulting in 0.5 lower yield of 50.2 bu. As expected, the USDA boosted its export outlook by 30 million and crush by 5 million bu. However, they also increased imports by 20 million bu & decreased beans’ residual demand by 13 mil-lion producing a 140 million ending stocks outlook. Soy-beans December stocks of 2.933 bil. bu also projects a 70 million fall residual similar to the past two years despite soybean exports being up 81% over 2019’s fall shipments.

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What’s Ahead

Corn’s big drop in US output and January’s smaller 20/21 bean & wheat ending stocks advanced prices quickly. S America’s weather & crop prospects will be the determiner of how much price ration-ing will be needed to balance world supplies before their S. Am supplies are widely available in March. Looking to up old crop sales to 90% at $5.45-5.55 in corn, $14.60-14.85 in beans & $6.80-6.90 in wheat.