USDA’s January reports were bearish for row crops with the agency shocking the market raising corn and soybean yields and production. While the addition to final ending stocks wasn’t substantially higher than December, it caught the market off guard and South American production numbers didn’t help.
USDA raised corn yields 2.4 bushels per acre to a record 177.3 with higher yields in the Eastern Corn Belt and that raised production 108 million bushels and to a new record of 15.234 billion bushels. However, that was offset by a nearly 583,000 acre drop in harvested acres and higher demand, so ending stocks were only raised 31 million bushels. But market analyst Jim McCormick with AgMarket.Net says that was still a bearish shock, “I think the trade was leaning to very pretty much a slightly unchanged yield number or even a slight adjustment down this upward revision of what they did. I haven’t seen it historically, but I’m guessing it’s one of the bigger upward revisions we’ve ever had in January. And there’s no doubt about it. Trade got caught flat footed in the markets reacting to it. You know, it’s not what we needed to see we already had a burdensome supply.”
The corn market reaction was negative, but McCormick is hoping the old adage that markets sometimes bottom when the news is the worst holds true. “Hopefully we can kind of wash this out today and then come out of a three-day weekend and with an argument we priced in the bearishness and maybe get some of those seasonal bounce.”
On soybeans the agency also bumped up yields by .7 bushels but with a nearly 435,000 acre drop in harvest acres, production was up just 36 million bushels, which went right to ending stocks.
McCormick says, “The crop plain and simple just performed better what we thought then the yield number is definitely a little bit negative offsetting that was a reduction in the harvested acres, but you know you’re adding to the ending stocks.”
South American estimates were also disappointing. On corn USDA cut Brazil’s crop 2 million metric tons and left Argentina unchanged. Brazil soybean production dropped 4 million metric tons, offset by a 2 million metric ton increase in Argentina. But the revisions were minor compared to private estimates.
McCormick adds, “Your production between those two countries is easily over 200 million their previous record production was 185 a few years back so the fact is, their crop is not down enough to offset our increased production.”
Wheat had the most constructive numbers with winter wheat seedings down 2.27 million acres from last year and ending stocks were lowered 11 million bushels.
