USDA surprises trade with latest report

The U.S. Department of Agriculture’s November World Agricultural Supply and Demand Estimates report has raised some eyebrows.

“It was a surprise today, I have to admit,” said DTN lead analyst Todd Hultman.

The big shock was contained in the new U.S. corn yield estimate of 174.9 bushels per acre, up from October’s 173.

That is expected to result in a new record of 15.234 billion bu. of U.S. corn production.

The USDA boosted feed, ethanol and export demand but it still ended up with 2.156 billion bu. of ending stocks for 2023-24, the highest in seven years.

That pushed down its forecast for the average farm price by a dime to US$4.85 per bu.

December corn futures fell following the report, matching the 2023 lows of about $4.68 per bu.

Hultman expected a post-harvest rally because of strong export demand for U.S. corn and early-season weather concerns in Brazil.

The USDA made slight upward adjustments to U.S. soybean production and ending stocks, but supplies are still going to be tight.

It did not make any adjustments to Brazil’s 2023-24 production estimate despite hot and dry conditions in the central and northeast part of the country and excess moisture in the south.

“Frankly, I think the market is much more concerned about that than anything they saw in today’s report,” he said.

July soybean futures finished the day at $13.74 per bu. What is impressive about that is that speculators are only net long 16,000 contracts, which isn’t much.

“It doesn’t have the bearish risk to it, as say other situations where we have speculators heavily involved in the long side of the market,” said Hultman.

“It’s impressive to see prices challenging $14 without much speculator involvement. That, to me, is the sign of a strong, bullish market.”

The USDA did not make many changes to the U.S. wheat balance sheet other than increasing endings stocks by 14 million bu. to 684 million bu.

That drove down the estimated 2023-24 farm price by a dime to US$7.20 per bu.

Supplies are still not super bearish. It is demand for U.S. wheat that is the problem.

“We just continue to struggle to find any export business,” he said.

Competition from cheap Russian wheat has been overwhelming in global markets and that situation just got worse.

The USDA now estimates Russian wheat production at 90 million tonnes, up from its October forecast of 85 million tonnes.

The new estimate is more in line with forecasts from the Russian government and private analysts.

World wheat ending stocks excluding China are forecast at 124.8 million tonnes, the lowest level in 15 years despite the increase in Russia’s production.

“That should count for something if we can ever get some demand generated,” said Hultman.

He noted that commercials are net long 29,527 contracts in December Kansas City futures, while non-commercials are net short 27,343 contracts.

The non-commercial speculators will likely have to cover their short position at some point and that could lead to a rally, but it has been a long time coming.

Tags: Russia, yield, corn, U.S., USDA, demand, price, Brazil, estimate, soybeans, ending stocks, Production, wheat, forecast