December 10, 2023

USDA reports not as friendly as expected

Angie Setzer

CHARLOTTE, Mich. — A last look at crop production estimates until the U.S. Department of Agriculture’s final summary in January was deemed neutral to bearish on higher production.

Karl and Angie Setzer of Consus Ag Consulting hosted on X, formerly Twitter, a live look at the USDA crop production and supply and demand estimates reports as they were unveiled Nov. 9.

Immediately after the report was released, soybeans were down 25 cents, corn dropped 8 cents. Wheat was down 15 cents.

Here are their views on the new USDA numbers.

On Corn

Angie: Corn ending stocks came in at 2.156 billion bushels, up 45 million bushels from last month. Corn beginning stocks were left unchanged. The corn yield per harvested acre was bumped up to 174.9 bushels per acre, a 1.9-bushel increase.

Corn carryout came out slightly higher just because of an increase in production and some other adjustments. Carryout was a little above expectations, but I think most everyone kind of anticipates corn carryout will end up somewhere in that 2.1 billion bushel range barring any sort of spectacular crop failure out of Brazil, which remains on the table at this point, I would say, since it’s early.

Karl: China corn output was unchanged at 277 million metric tons. USDA bumped up the Ukraine corn crop by 1.5 million metric tons to 29.5 million.

The Argentine corn crop production came out at 55 million metric tons with no reduction there. There was also no change in the Brazil corn crop production at 129 million metric tons.

Angie: South American production is something that’ll be factored in over the next couple of months when we get a better feel for what that forecast looks like.

World corn ending stocks was at just over 315 million metric tons. Traders were expecting around 312 million. So, we did see a bump there, but most of that is because of what we had seen from a production increase in the U.S.

On Soybeans

Angie: USDA increased yield expectations by 0.3 bushels per acre. Everything else was basically unchanged. There was a 1 million bushel reduction in residuals. Soybean ending stocks of 245 million bushels.

It was probably more bearish for soybeans than neutral just because the USDA did increase production slightly and did not do anything when it came to adjusting demand.

So, the carryout increased to 245 million bushels versus the 222 million the trade expected. Production came in higher than expected.

It put carryout back into what I’m not going to say comfortable at 245 million bushels, especially if we see a continuation of weather issues in South America and strong business.

Karl: The big one is USDA has the Brazilian soybean crop at 163 million metric tons and 162.5 million was the estimate. The 163 million metric tons is unchanged from last month.

On Market Reaction

Angie: In looking at trade reaction, we’re down slightly and I wouldn’t really say much in the way of big surprises today.

Karl: Nothing jumps out, really. I guess if there’s anything I would look at is historically we traded up on soybeans entering this report. We had quite a bit of buying leading in.

To see us reverse that direction coming out of the report is not that uncommon at all. The bottom line is I don’t think we got the bullish data in the report and neutral is obviously negative.

Angie: We’re going to test the downside. The December support right now is at $4.68 on corn. We traded down to $4.66 1/2. Do you think we’ve really got to see that $4.68 hold?

Karl: Yes, I want to see that hold. Obviously, we’re dipping down to it, but we’re in this sideways pattern between that Bollinger Band and that nine-day moving average, and that’s starting to trend down. There’s just not a lot of technicals on our side on that December corn contract either.

We’ve been trying to build January soybeans, but it got probably a little overextended to the upside, and obviously today we’re drifting lower. Our next real line of support there will come at that 100-day moving average at $13.44.

Angie: We are seeing the corn market work its way back soon after the report was released to only down a nickel now. I think you’re going to see the range really do the heavy lifting. I keep saying the phrase “violently range bound.”

The one thing I think we’re kind of forgetting about or not taking into consideration ... is the business that we’re seeing get done now, especially with China, is business that we absolutely had to see.

We were so far behind the soybean export pace needed and we will probably work our way back. I was in the camp that you could see some continued cuts to export outlooks for the U.S.

I’m not necessarily thinking that now with the (year-over-year) reduction in soybean production, but we’ve got to see what happens over the next couple three weeks and as we work our way into December.

The December weather will be what really, really matters. Brazil weather is going to have more of an influence on trade direction and cash market flow, and all of those things weigh more than a lot of other things at this point.

The December report won’t matter. We typically get zero changes in that and I don’t think we’ll see that be very different.

The January report is going to be the next big one. That will be quarterly stocks, final production numbers, all kinds of stuff.

So, that leaves us with two months of just kind of basically trading whatever happens in the cash market and whatever trader sentiment money flow and outside markets tell us from a direction standpoint we should head.

Karl: It wasn’t so much that the report was bearish. It just wasn’t as friendly as the trade was expecting.

Tom Doran

Tom C. Doran

Field Editor