One of the biggest information days in the grain business comes in January. This year, it came Jan 10. The anticipation of many new fundamental numbers released on that date by U.S. Department of Agriculture led this year to market analysts referring to it as the “data dump” day.
Most notable is the information released in the World Agricultural Supply and Demand Estimates report and the Quarterly Grain Stocks report. The stocks report tells us what quantity of grains was on hand in all locations Dec. 1, for the quarter ending on that date. The WASDE tells us many things.
Final numbers
The most notable items of interest in the January WADSE are the crop production numbers. Often those numbers don’t change much at the end of the year, but there is normally some revision in the January report.
The January report is considered the “final” report or the “inventory” report since it normally has the final, counted, absolute, solid number representing the actual crop size for the preceding crop year.
The number this Jan. 10 is the production number for each crop of the 2023-2024 year. Until the January reports, we do not have final number for the 2023-2024 crop production year, even though the new 2024-2025 crop year is well along, starting Sept. 1.
It is not unheard of that there are futures price revisions to crop size, but that is rare. Also rare are the magnitude of some of the revisions this year. Normally, if the crops are seen to be smaller than previously estimated, small changes are made in each month’s supply and demand estimates by USDA. The USDA then arrives normally at a small change in the January numbers, but nothing that shakes the market.
This January, we got surprises in the yields of corn and soybeans. The corn yield was below the lowest trade guess. The soybean yield was also lowered. The result of lowering the yields was lower crop production numbers for corn and soybeans and sharply higher prices Jan. 10 with follow-through to Jan. 13.
The December USDA estimate for the corn crop production was 15.143 billion bushels. The trade expected, according to the average trade estimate, a report of 15.095 billion bushels, a small correction. What they got was 14.867 billion bushels! This led to a close of March corn futures in Chicago that was 14 1/2 cents higher than the previous close Jan. 9.
The soybean estimate was similar, but not relatively as large. The December USDA estimate for crop production was 4.561 billion bushels. The average trade guess was 4.453, a significant change, but not nearly what USDA reported. Their estimate was for 4.366 billion bushels. This led to a Jan. 10 gain at the close of 21 1/4 cents for March soybeans and gap higher Jan. 13 to a close of $10.41 and a gain at the close of another 28 cents.
The corn bounce represented a new 6-month high for corn, and a 2-month high for soybeans. Soybeans have been in a downtrend, and it remains to be seen if this is a trend changer. The corn has been in an uptrend, and this report is being termed as “bullish.”
Hindsight
Some observers, in hindsight, see the corn production drop as a result of late hot and dry weather as the crop was finishing. The corn yield is now estimated at 179.3 bpa, 2 bpa lower than the December estimate. USDA now puts the grain stocks for Dec. 1 at 3.1 billion bushels. The world stock is now estimated to be the lowest since 2014. In some respects, it is the grain stocks that is the biggest surprise.
Cash grain traders have long speculated that the earlier crop production estimates were too high. As I wrote in this space a couple of months ago, the spreads at that time between December and March corn futures indicated that cash buyers were having to bid narrow basis to buy corn. This was perhaps an indication of less supply, although it also makes sense that farmers were not willing to sell corn as cheaply as it was bid shortly after harvest.
Now that same scenario is getting some analysts to speculate that the bullish reports Jan. 10 will be limited by the fact that farmers have not sold much and will sell in the coming months at these higher prices. Those sales will hold down the futures rally if that argument holds.
As for the cuts in yield, I remember farmers telling me that they had great corn yields, but the soybeans were not as good as hoped. These reports came from Ohio farmers, while the driest and hottest corn fields were farther west. The nation’s soybeans are now estimated to have yielded 50.7 bpa, down a bushel since the December USDA numbers.
Foreign news is also interesting. Brazil has now officially started soybean harvest, but just barely. The most northern province has started, and the national crop is now just 0.3% harvested, having been held up by wet weather. Meanwhile, the Argentine corn and soybean crops are being badly hurt by a month with no rain.
Corn exports were at 56.7 million bushels last week, which is a 64% improvement over the previous week. The accumulated total for the new crop year is modestly above the expected pace for the year.
Last year’s soybean exports to China were a new record. That quantity may have been pushed by a China fear that they could be fighting a tariff imposed by the incoming president. On the other side of that argument is the idea I read in one post today that Trump would likely negotiate another new trade agreement with China, which would help our exports. That is well and good, but we were left panting, waiting for the last China agreement for more than a year.
And, finally, the news that Russia, the world’s largest wheat exporter, only exported 73.5 million bushels of wheat in December. That would be 41% lower than the November exports. It has long been noted that weather problems there would mean they had small crops and would have smaller-than-normal exports.
