USDA is set to release its final 2022 U.S. crop production estimates on Thursday, Jan. 12, a report that has a history of producing some surprises. Will this year follow that trend? The answer is anyone’s guess, but the stage is set for some potential changes that could spark reaction for corn and soybean prices.
Brian Splitt of AgMarket.net points out USDA increased U.S. crop yields in its November report. He says that historically signals USDA will raise yields again in the January reports That’s why Splitt thinks the potential changes to both supply and demand changes could loosen up the balance sheets.
“When you look at the trend of increasing yield in the November report, then translating to an increase in yield in the January report, we could very well see the supply side of the balance sheet for both corn and soybeans grow,” says Splitt.
Another concern he says is on the demand side, specifically corn exports.
“I think the trade is in the mindset we could see an additional 75 million to 100 million bushels come off of corn for export,” says Splitt. “We could potentially see 50 million bushels come off of soybeans for export. What that means is you’re going to have the carryout grow in the supply and the demand side of the balance sheet. That’s going to look very bearish, especially when the fund manager is holding long positions in both markets.”
Splitt thinks any revisions to South America’s crop will also be closely watched in the January report. Argentina has been hit by dry weather, but the area did see recent rains.
“When you look at the size of Brazil plus Argentina together, even though the USDA may still be 5 million to 10 million tonnes too high on their Argentine soybean estimate, we’re going to have a record crop combined when you look at Brazil, Argentina, Paraguay and Uruguay,” says Splitt. “And I think eventually that’s going to weigh on the market.”
Tommy Grisafi of Advance Trading also foresees pressure on the commodity markets, even longer-term.
“Agriculture has been good and everyone’s going full blown back into production agriculture, add technology to that, and we’re growing more bushels with less,” says Grisafi.
He thinks it’s an issue for wheat prices, as well as other commodities. So, for Grisafi, there’s a bigger question growers should be considering when developing their marketing plans for 2023.
“I guess the question I would pose is what bullish news do you think’s going to come out that isn’t already out there? Do you think we’re going to have continued weather problems across the world? We’re not going to have Russia invade Ukraine again,” says Grisafi. “I don’t see what the big bullish fundamental news is. And demand is dropping off in a big way here when it comes to our markets”
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