Grains and cattle markets ended higher on Tuesday with hogs mixed.
Corn Rallies on USDA Yield Cut
Dec corn was up 9 3/4 at $4.49 with a positive reaction to a bullish USDA report. The agency cut national corn yield by 1.6 bushels per acre to 179.6 bpa.
Arlan Suderman, Chief Commodities Economist with StoneX says that was below their customer survey yield estimate at 183.1 bushels per acre.
“I know a lot of people criticized us for that, but that’s what our customers told us. That was our official estimate. My yield model, which got a lot of criticism a year ago, July was precisely at 179.6. That’s the final yield number for the yield model. And so it’s been performing very well for me.”
The trade was braced for the possibility USDA could have a higher yield but average trade guess was down 1 bushel per acre, so a little more than the trade anticipated.
Does Corn Yield Continue to Shrink?
How rare is it to have yield go down on corn from the October to the November report especially after it went up from September to October?
Suderman says, “Historically, if you look back since 1993, about 60% of the time when they went up in October, they went up again in November. So this went against that longer term trend. If you pull it back in the last 10 or 20 years, it was maybe a little bit the other way.”
So does the corn yield continue to go lower into the final report in January?
“The trade’s going to assume that any adjustments in January will be small. Of course, the last couple of
years, we’ve seen some surprise big adjustments in January. I think USDA’s trying not to have a repeat of that this year. I think a fraction of a yield change. And so I’m not expecting a market moving change in corn yield in January.”
State Corn Yield Changes
The state-by-state breakouts showed Illinois corn yield down a whopping eight bushels per acre, Nebraska was down four, Missouri and Indiana down five, which was offset by a record 204 bushels per acre in Minnesota, which was up nine and South Dakota was up by two. Iowa was left unchanged at a record 219 as well as Ohio at 200 bushels per acre.
He says five states had record corn yields down from the tally in October.
“Iowa and Minnesota certainly seeing records. Great crop in Indiana and Ohio as well overall. So, yeah, we had some states that really did well. We had some states that really disappointed. And so this was a combination of those numbers and probably a fair assessment of the crop.”
Iowa could still be high because at 219 that is up eight bushels from the previous record. But Suderman says farmers there had some outstanding yields there that nobody was talking about.
Corn Ending Stocks Tighten
Ending stocks on corn were lowered by 91 million bushels to 1.758 billion bushels with a stocks to use ratio at 10.8%.
So, could this help bottom the market? Suderman thinks this could at least get funds to stop selling corn.
However, this is an adequate supply to meet anticipated demand moving forward so there is no reason to ration demand with higher prices at this point.
He says the bigger risk is corn is 300 million bushels behind the seasonal pace needed to hit USDA’s export target so that number could go down.
“The focus is going to be on Brazil and how El Nino affects their growing season for their winter corn crop, which won’t even be planted until February. So it means we’re going to be watching the long-term weather forecast to see if that might be a risk or not. If it’s not, then corn probably has downside risk. If it looks like it’s going to be, then those risks go for the higher prices start to come back again.”
Acreage Battle
Suderman says the bigger story is that both corn and soybeans will need to add acres next year and the assumption is corn is going to lose acres in the coming season. “And if that’s the case, then we for sure have to have a record yield next year.”
That set up an acreage battle for 2027 that leaves the market vulnerable over the next six months between now and then.
Soybean Yield Up Slightly
January soybeans were up nearly 40 cents to $12.28 as USDA raised soybean yield by 0.2 bushels per acre, to 53.3 bushels. That was below the average trade guess of 53.5.
Suderman says the market was trading a higher yield of around 54.5 to 55 bushels per acre which is why the market rallied. Plus, USDA raised exports by 25 million bushels which lowered ending stocks to 300 million bushels.
“The export number could go up at least another 100 million bushels if China goes ahead and follows through on the 25 million metric tons that we think. That means we’re still tight. That means we still have some more rationing to do,” he explains.
Do Soybean Yields Go Higher?
States like Minnesota, Iowa and Nebraska all saw yield increases on soybeans in the report. So will yields continue to move higher into the final report?
“That’s a real possibility. And I think as we approach that January report, which is the next time we’ll get an adjustment in supply, the market’s going to be braced for the possibility of a more significant increase in soybeans,” he says.
Rallies to Be Sold
However, Brazil’s crop conditions have been good to start the season and they are on tap for a big crop. So he says Brazilian farmers are looking to sell rallies, especially with China buying more U.S. soybeans this year.
“So we may not go lower, but at the same time, going up is going to be more challenging going forward, I think, because we’re going to see Brazilian farmers selling into the rally, and that’s going to slow the progression upward,” he adds.
Do Funds Stop Selling Soybeans?
So with a 300 million bushel ending stocks figure on soybeans that doesn’t leave much room for error.
Does that get the funds to quit selling their long position in the soybean complex?
He says, “I think they’re going to be reluctant to. Obviously, if you get projections of additional strength in the size of the Brazilian crop, that can psychologically have an impact. We have guaranteed demand, so to speak, in the United States and what we need to meet that. And anything short of that means that prices have to ration that supply to that demand to match it up.”
Suderman thinks USDA needs to increase exports so that means more upside than downside risk for the market and end users.
Soybeans Back Above Resistance
January soybeans did move back above the 200 day moving average which was important.
“And I think something that’ll be respected by the market,” he adds.
Wheat Sees Higher Global Stocks in WASDE
Wheat saw a slight increase in domestic ending stocks by 3 million bushels to 743 million. Global stocks were raised nearly 5 million metric tons to 280.8 million metric tons.
However, the big key isn’t supply it is logistics.
Wheat Watches Peace Talks
Suderman says this is a pivotal week, not only with WASDE report, but the Ukraine and Russia and United
States all negotiating today in the Middle East.
“What headlines might come out of that? I am not optimistic that we’re going to see peace anytime soon there, but that risk is there for the market. And this market has been quick to sell off when there are signs of peace. So that is the risk,” he says.
Right now the wheat market has little if any war premium built into prices because the U.S. is not getting any export business from the Black Sea export slowdown and other sources are still cheaper.
However, if the Black Sea remains closed into early 2027 that business will start to come to the U.S. and as such USDA did not cut their export target in the WASDE.
Otherwise, he thinks wheat is showing signs of carving out a near-term low right now.
He reminds farmers that the hot inflation report also keeps inflationary concerns top of mind for the funds who have tended to want to be long the grain and oil seeds and the energies in that environment.
