Market-friendly surprises on report day

KANSAS CITY, Mo. — Sifting through the U.S. Department of Agriculture’s largest annual crop data dump unveiled some initial friendly surprises for the grain market.

USDA’s January reports include the first quarter marketing year grain stocks report, the monthly supply and demand report, the 2022 crop production summary, and winter wheat seedings.

Arlan Suderman, StoneX chief commodities economist, waded through the reams of data in a webinar following the reports’ release Jan. 12.

What were some of the surprises in these reports’ numbers?

Suderman: There were numerous ones, but the quarterly stocks report was positive for all three of major grains. Wheat came in about 64 million bushels below the average trade guess.

Corn stocks came in about 360 million bushels below what the trade was anticipating. Soybeans were about 110 million bushels below what the trade was expecting.

Then you go to the supply and demand and production estimates and USDA cut 1.6 million acres off of harvested corn, corn acres that were abandoned in other words. That would be in the western Corn Belt where the drought was most intense.

It cut 300,000 harvested acres off soybeans and 900,000 harvested acres off of grain sorghum. So, the drought really had an impact there.

On the yield side, USDA went up on corn and went down on soybeans. The corn yield came in 0.8 of a bushel above the average trade guess and a full bushel above USDA’s November estimate at 173.3 bushels per acre.

USDA dropped the average soybean yield average to 49.5 bushels per acre, which is down from 50.2 in November and below the average trade guess of 50.3. So, there were a lot of a lot of surprises in these reports and more friendly than not.

Total winter wheat acres of 36.95 million, up from 33.27 million last year and up from the average trade guess of 34.485 million. There’s going to be a big difference between seeded winter wheat acres and actual harvested winter wheat acres in the High Plains.

There was also focus entering the reports on South American data, particularly in Argentina.

Suderman: The baseline USDA had for Argentina was 55 million metric tons for corn and 49.5 million for soybeans. The Rosario Grain Exchange estimate that came out Jan. 11 dropped Argentina corn to 45 million metric ton, down 10 million metric tons, and soybeans at 37 million metric tons.

USDA didn’t expect to be that aggressive this early, and I think that’s understandable. They did pretty much what I expected. USDA came down 3 million on the Argentine corn to 52 million and came down 4 million on soybeans to 45.5 million metric tons.

For Brazil, USDA came down 1 million metric tons to 125 million on corn. We think that’s a little on the light side right now.

That’s mostly due to losses for the first-crop corn. We think they may be cutting it a little bit too much.

On soybeans, USDA is at 153 million metric tons in Brazil. That’s up 1 million metric ton from last month.

They’re really coming up toward our estimate. We’re at 153.8 million. I think that was justifiable.

The initial trade reaction was positive on the corn and soybeans. Is the feeling of the market positive going forward from these numbers at least in the short-term for corn and soybeans?

Suderman: I definitely do, and I think it puts a lot more focus now on the Argentine drought. I think probably more than is needed if we have a big Brazilian crop, but the perception is reality in the market and the perception is now that the short Argentine crop is going to be a big problem.

On the wheat side, the trade is trying to get a handle on the increased acres versus the tighter stocks we have for the old crop and increased feed usage.

I think we’re going to be looking at increased feed usage for corn, as well, overall; even though we’re down on animal units, USDA was too aggressive in cutting.

This is a market that has good support now and we’ve refocused on the fundamentals, generally tight global corn supplies, tight soybean supplies and we may be finding an area of value on wheat right now.