Grains all closed lower for the week. March corn fell 13¾ cents, March soybeans were down 32 cents, March soybean meal lost $7.30 per short ton and March soybean oil gained 62 points. March Chicago wheat fell 20 cents, March Kansas City wheat was down 12¾ cents and March Minneapolis wheat slid 13 cents.
Just when farmers thought the corn and soybean markets couldn’t get any more bearish, USDA provides another shock to prices with the January reports. USDA raised corn yield 2.4 bu. to a record 177.3 bu. per acre. The increase was partially offset by a nearly 600,000 acre drop in harvested acres, but production was still raised by 108 million bushels to a new record of 15.342 billion bushels.
John Heinberg with Total Farm Marketing says he wasn’t totally surprised considering the harvest results from his clients.
“You did hear that from the countryside with guys talking about the amount of corn they got or how things finished out with a surprising corn crop. Deep down inside, I guess I wasn’t surprised we saw that yield jump, but it was a big number,” he says. “Obviously, that just trickles through the entire balance sheet.”
Jim McCormick, AgMarket.Net, says USDA also raised demand, though it wasn’t as bearish as it appeared, as USDA only raised ending stocks by 31 million bushels. However, it still caught the market off guard.
“I think the trade was leaning toward a slightly unchanged yield number or even a slight adjustment down versus the upward revision they did,” McCormick says. “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, the trade got caught flat footed. It’s not what we needed to see — we already had a burdensome supply.”
March corn hit a new contract low of $4.41 on Friday. Will corn see a lot more downside pressure trying to price in the extra bushels?
“We broke $4.60 on March and closed well under that Friday. That was a bigger multiyear trendline coming through that we needed to stay above, at least from the seller’s standpoint on the technical side,” Heinberg says. “However, the December contract before expiration went down to $4.47 and March gravitated back to that level toward the end of the day. Maybe that’s a key number that can hold.”
Market experts are hopeful with the holiday weekend some of the bearish sentiment will subside and Friday’s break in prices will create some sort of seasonal bounce. However, Heinberg says the charts look defensive and it might be difficult for the corn market to find traction as any large rally will be met with farmer selling.
On the soybean side, USDA also bumped up yield by 0.7 bu. to 50.6 bu., but with a nearly 435,000 acre drop in harvest acres, production was up just 36 million bushels. That raised endings stocks to 280 million bushels. Again, Heinberg says that was higher than the trade estimated.
“I think the higher soybean yield definitely came into play. We kept talking about carryout and that 280 million bushels isn’t a big supply, but it’s more than the market was anticipating,” he explains.
South American estimates were also disappointing to the trade, as Heinberg says the revisions were minor compared to the private estimates. USDA cut Brazil’s corn crop 2 million metric tons, which is still well above private and Conab estimates, and left Argentina unchanged. Brazil’s soybean production was lowered 4 million metric tons to 157 million, offset by a 2 million metric ton increase in Argentina. The revisions were minor compared to private estimates.
Heinberg says: “I really think the soybean market is probably pricing in a 150 million metric ton Brazilian crop.”
He thinks it will take even lower production in Brazil to get positive price reaction.
“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,” McCormick adds.
March soybeans hit a low of $12.06 and bounced on Friday. Will $12.00 technical support be able to hold longer term without a big decrease in Brazil production? Heinberg says it might be a tough lift without much lower Brazil production or a pick up in demand from the lower prices.
Wheat had the most constructive numbers with winter wheat seedings down 2.27 million acres from last year at 34.4 million. Hard red winter wheat acres accounted for 24 million, soft red winter for 6.86 million and white for 3.54 million. Plus, U.S. ending stocks were lowered 11 million bushels to 648 million. While that was constructive, Heinberg says the market disregarded it and instead followed corn and soybeans lower.
