USDA raised yield, production and ending stocks for both corn and soybeans in the November WASDE leading to a bearish reaction in the markets. Corn took out the September low but soybeans also fell and did technical damage. However, market analysts say soybeans are likely to quickly turn the focus back to South American weather which has been supportive.
USDA’s nearly two-bushel corn yield bump to 174.9 bushels per acre was the most bearish shock and goes against the trend of yields continuing to decrease from the October to the November report. However, USDA also raised demand by 125 million bushels which offset the record production estimate of 15.2 billion bushels. So, ending stocks were only raised 45 million bushels. Market analysts say it could have been much worse with so many harvest reports from farmers of better-than-expected yields.
Brian Splitt, AgMarket.Net, says, “That was not as bad as it could have been because the USDA did offset quite a bit of that additional production with additional demand. They increased ethanol by 25 million bushels, and they increase the feed residual and export category by 50 million bushels each. So, 125 million bushels of extra demand definitely kept that report from being kind of a knock your socks off bearish type number.”
USDA also raised soybean yield .3 bushels instead of lowering it as some estimates projected and again bucked the historical trend. However, here USDA made no changes to either crush or exports, so the net result was a 25 million bushel increase in carryout. Splitt says that’s still tight and with the huge pick up in exports and South American weather concerns the market will likely bounce off the lows hit Thursday.
Splitt says, “So the carryout did go up to 245 million bushels. It’s tough because you still have the South American story going on. And it seems like the weather forecast right now still looks to see the correct pattern maintained and that is dry in the northern growing regions, regions, Mato Grosso and then to wet down south and that wetness has been exceedingly aggressive rainfall.”
Splitt says if that weather pattern continues it will lower Brazil production, but USDA did not make any revisions to the South American crop because it’s too early in the season.
Wheat ending stocks were raised 14 million bushels to 684 million as USDA left exports unchanged and raised imports 10 million. Global stocks raised also 600,000 metric tons on wheat.
