We were hoping the Jan. 12 World Agricultural Supply and Demand Estimates and quarterly Grain Stocks Report from the U.S. Department of Agriculture would be a non-event. It did not work out that way.
Traders’ guesses before the WASDE, the final Crop Production Report, and the Grain Stocks Report were for little changes in yield and supply to the downside and a floor under the awful prices of the last couple of weeks. That is not what we got.
What we call the “final” inventory report that canonizes the 2023-2024 crop did not come in as expected. In corn, the market expected a cut in yield of maybe .7 bpa. Instead, USDA reported an increase of 2.4 bpa to 177.3 bpa.
Remember, this came in a year of late planting because of wet conditions in many areas, then a dry summer in the heart of the Corn Belt that had farmers panting for water. Those are the conditions that surprises are made of. The final yield came in very close to the original estimate by USDA, before all the growing problems.
Harvested acreage for corn was cut by 600,000 acres, for a new net acreage of 86.5 million. Still, the yield increased overcame the planted acres decrease and increased the final production number by 108 million bushels. That gave us production of 15.342 billion bushels, 130 million more than expected.
Some other numbers were juggled a bit. The end result was ending stocks projected for Aug. 31, 2024, the official end of the crop year, at 2.162 billion bushels. The market was expecting a cut, so they were leaning the wrong way, and it showed when trading continued after the noon ET reports release. Add to the production problem the actual estimate of grain stocks by the Census Bureau for Dec. 1, at 12.169 billion bushels. That is the largest since 2010. Setting records is not much fun.
World supply
The world supply added to reports that were all in the wrong direction, even with drought-reduced crops in South America. The world supply was estimated at 289 MMT, a new record. This supply assumes a 2.7 MMT extra from the U.S., 2 MMT less from Brazil and 11.8 MMT extra produced in China. The net result of this is that world stocks are now estimated at 325.22 MMT. The trade expected 313.8 instead. So, a significant increase in domestic and foreign supplies of corn.
It should be noted that these production estimates are for the 2024 crop here and the 2023-2024 crop in South America. A lot has to happen before this crop comes to town. Of course, in the case of South America, we have already cut the estimates of their crops because of dry weather early in their planting and current forecasts. There is a lot of slush in the South American numbers, especially.
Also, there is no official accounting for Chinese numbers, so anything can be the truth. So far, we already have the anomaly that Argentina has just raised their estimate to 59 MMT, but the USDA is carrying it at 55 MMT.
Let me make that more clear since I am reporting two different crop years at the same time. It is our current crop, in the bins, that we are trading right now, but prices are affected by traders looking ahead to how the South American crops come out before ours are finished.
Prices
Based on these numbers, corn is cheap, but could get cheaper until we see some actual bullish fundamental news. Typically, report reaction is a one- or two-day wonder. The market adjusts and then goes on from there. In this case, the reports came on a Friday with just half a trading session to react in the market. We dropped the price of corn a dime but had a 19-cent range. We closed six cents off the low.
Then, we had a three-day weekend to think things over. This is being written on the evening of Jan. 15, after a holiday where there was no trading. The trading Jan. 16 will tell the story of any adjustment still needed. In early overnight trading, corn futures are mostly unchanged so far.
That gets us to soybeans, where the reaction was also bearish for prices, yet, we have a much tighter carryout for the end of our summer. The market traded a range of almost 44 cents Jan. 12, falling after the report, but coming back to close down just 12 1/4 cents on the March contract at $12.24 1/4. In the evening session Jan. 15, we were actually up seven cents at 12.31-1/4.
Wheat did not have the report problems, but traded in sympathy with corn and soybeans Jan. 12. On a daily range of 24 1/4 cents, May wheat futures came back at the close for just a 7 3/4 loss. It was actually up almost four cents the evening of Jan. 15 at just a tick under $6.
Wheat spec traders are buying back some shorts and that can continue to help or even provide an excuse for the market to recover, especially, since the new crop plantings came in reduced to 34.425 million acres. The count last year was 36.699 million acres.
The acres were somewhat offset in the calculations by the Dec. 1 grain stocks, which reported at 1.410 billion bushels while the expectation in the market was for 1.391 million.
The big change for wheat came in the carryout. The USDA now expects us to end the year at 260 MMT, an increase of 1.83 MMT. That is because the trade expected no change from last year.
