Grain and livestock futures end mostly lower Friday except soybeans. However, grains all post higher weekly closes.
Grains Quiet Friday Ahead of the USDA Reports
Grain markets were nearly flat on Friday on positioning head of USDA’s big data dump on Monday. Darren Frye with Water Street Solutions says the trade guesses are fairly conservative with not many changes expected. However, that is not the history of the January reports. So could there be a surprise?
Could USDA Surprise the Market With Lower Corn Yields?
Last January USDA shocked the market with an nearly 4 bu. per acre cut in corn yields. So could history repeat itself? Frye says average trade guesses have corn yield down just 2 bu. at 186 bu. per acre, so the market is not looking for a huge change. He doesn’t think there is much likelihood the report will be bullish for corn because USDA isn’t likely to cut yield by 4 bu. like it did last year. Even if they did he thinks feed and residual is too high and the agency would just adjust that category to offset the production losses. That would result in ending stocks still close to the 2.0 billion bu. mark.
Trade Expects Only Minor Soybean Balance Sheet Changes
Trade estimates are also very conservative for soybean yield with a cut of only .3 bu. per acre. Frye admits the end of the season was dry and that hurt yield as soybeans fell down to only 8% to 9% moisture. However, he says soybean yields were still above average in many areas. As far as demand, he doesn’t think USDA will lower exports below the 1.635 billion bu. from last month even with sales running 30% behind last year. “I would have thought USDA would have lowered those already but they have been slow to adjust so I don’t see them making much of a change,” he says. That would leave ending stocks close to the 290 million bu. level in the December WASDE.
USDA to Release Dec. 1 Quarterly Stocks
USDA is also set to release quarterly stocks as of Dec. 1 and in the past that is the where a lot of the surprises have come from in USDA reports. Quarterly stocks are pegged at 12.96 billion bu. for corn, up 870 million bu. from last year. Wheat stocks are projected at 1.63 billion bu. which is up about 63 million bu. year over year. U.S. quarterly soybean stocks as of Dec. 1 are estimated at 3.25 billion bu. compared to 3.10 billion on Dec. 1, 2024.
What Do Corn and Soybeans Need in the USDA Reports to Rally?
Even though corn and soybeans were higher for the week, corn is still trading in its sideways range while soybeans have only recovered a small portion of the $1.40 losses from the November highs. So what does the market need to see in the report or otherwise to produce a rally? For corn, Frye says if the USDA report doesn’t provide a catalyst then the only other hope is a problem with Brazil’s safrihna corn crop. For soybeans, the balance sheet is much tighter but to rally the market soybeans will need to see more China business beyond the 12 MMT for this year.
Wheat Market Expects Lower Winter Wheat Acreage
Trade guesses for wheat ending stocks show just a 5 million bu. cut to 896 million bu. The bigger impact will be winter wheat seedings with expectations that lower prices curbed planting this fall. All winter wheat acreage is estimated 800,000 acres lower than last year. Most of this is likely programmed into the market though according the Frye and so it will need a weather problem or a geopolitical story to rally futures.
Cotton Needs a Catalyst
Cotton futures have recovered off of contract lows but the market is still depressed. So what could change that? Frye says cotton is tied to crude oil so that market may need to rally first.
Cattle Set Back Despite Higher Cash
Live and feeder cattle futures ended lower on Friday despite higher cash trade. Feedlots in the North reported $232.50 to $233 live sale prices but most of those bids were being passed, there was also additional trade on a dressed basis in the North at $365, up $5 from last week’s weighted averages. In the South feedlots were also holding out for higher money than the $232 bids offered by packers before the futures closed but sold some $232 in Kansas later in the afternoon.
The cattle futures were overbought so was Friday’s set back and divergence from the higher cash a healthy correction? Frye says there was some concern about news packers were cutting kills next week, with several plants going to 32 hours. Tyson’s Lexington, Neb. plant was also closed on Friday or at least there were no shifts being schedule for next week. That plant closing early, after initially announcing it would go dark on Jan. 20.
