Big Crops Don't Always Get Bigger

January 12, 2017 12:10 PM

Market reaction

Ahead of USDA's reports, corn futures were trading steady to fractionally lower, soybeans were 2 to 3 cents lower, wheat futures were narrowly mixed in SRW contracts, around a penny lower in HRW contracts and 2 to 8 cents higher in spring wheat. Cotton futures were mostly around 20 points higher.

Corn, soybeans and wheat had an initial positive reaction to the report data, but corn has softened and is now trading 3 to 4 cents lower. Soybeans are mostly 13 to 15 cents higher, SRW wheat futures are mostly 3 to 5 cents higher, HRW futures are around 6 cents higher and spring wheat futures are 2 to 8 cents higher. Cotton futures are now mostly 60 to 70 points lower.

 

Annual Production Summary

Corn: 15.148 billion bu.; trade expected 15.196 billion bu.
-- compares to 15.226 billion bu. in Nov.; 13.601 billion bu. in 2015
Beans: 4.307 billion bu., trade expected 4.374 billion bu.
-- compares to 4.361 billion bu. in Nov.; 3.930 billion bu. in 2015
Cotton: 16.96 million bales
-- compares to 16.524 million bales in Dec.; 12.89 million bales in 2015

Ok... so, big crops don't always get bigger. USDA surprisingly lowered its soybean crop estimate by 54 million bu. from last month whereas traders were anticipating a 13-million-bu. increase. USDA also lowered its corn crop estimate 78 million bu. from last month, which was 48 million bu. smaller than anticipated.

To get the smaller corn crop estimate, USDA cut harvested acreage by 88,000 acres from November and trimmed its yield estimate by 0.7 bu. to 174.6 bu. per acre, which is still easily a record. Compared to November, USDA lowered yields in Illinois (down 5 bu. to 197 bu.), Indiana (down 4 bu. to 173 bu.), Kansas (down 5 bu. to 142 bu.), Missouri (down 2 bu. to 163 bu.), Nebraska (down 6 bu. to 178 bu.), Ohio (down 5 bu. to 159 bu.) and Wisconsin (down 2 bu. to 178 bu.). USDA raised its yield estimate in Iowa (up 4 bu. to 203 bu.), Michigan (up 2 bu. to 157 bu.), Minnesota (up 3 bu. to 193 bu.), North Dakota (up 4 bu. to 158 bu.) and South Dakota (up 13 bu. to 161 bu.).

USDA's smaller soybean crop estimate was the result of a 311,000-acre reduction in harvested acres and a 0.4-bu. decline in the national average yield to 52.1 bu. per acre, which is still easily a record. Compared to November, USDA lowered yields in Arkansas (down 1 bu. to 47 bu.), Illinois (down 3 bu. to 59 bu.), Indiana (down 1.5 bu. to 57.5 bu.), Michigan (down 1.5 bu. to 50.5 bu.), Missouri (down 1 bu. to 49 bu.), Nebraska (down 1 bu. to 61 bu.) and Ohio (down 0.5 bu. to 54.5 bu.). USDA left its yield estimate unchanged for Kansas (48 bu.) and Wisconsin (55 bu.). USDA raised its soybean yield in Iowa (up 1.5 bu. to 60.5 bu.), Minnesota (up 0.5 bu. to 52.5 bu.) and North Dakota (up 0.5 bu. to 41.5 bu.).

USDA's cotton estimate came in 435,000 bales higher than last month. USDA lowered its harvested acreage estimate by 133,000 acres and raised its national average yield peg by 34 lbs. per acre. The bulk of the acreage reduction was in Texas as harvested acres were cut 101,000 from December. USDA raised its yield in Texas by 50 lbs. per acre and lowered its yield peg in Georgia by 12 lbs. per acre.

 

Quarterly Grain Stocks

Corn: 12.384 billion bu.; trade expected 12.300 billion bu.
-- compares to 1.738 billion bu. Sept. 1; 11.238 billion bu. Dec. 1, 2015
Beans: 2.895 billion bu.; trade expected 2.935 billion bu.
-- compares to 197 million bu. Sept. 1; 2.715 billion bu. Dec. 1, 2015
Wheat: 2.073 billion bu.; trade expected 2.056 billion bu.
-- compares to 2.527 billion bu. Sept. 1; 1.746 billion bu. Dec. 1, 2015

Dec. 1 corn stocks were up 10% from year-ago and 84 million bu. more than the trade expected. Of the total stocks, 7.61 billion bu. were stored on-farm (up 11%) and 4.77 billion bu. were held off-farm (up 8%). Implied first-quarter 2016-17 corn use was a record 4.50 billion bu. versus 4.10 billion bu. in the same period last year.

Soybean stocks in all positions as of Dec. 1 were up 7% from last year but 40 million bu. less than the average pre-report trade estimate. Soybeans stocks held on-farm totaled 1.34 billion bu. (up 2%) and off-farm stocks were 1.56 billion bu. (up 11%). Implied disappearance during the first quarter of 2016-17 was a record 1.61 billion bu., up 15% from last year and easily besting the previous record of 1.495 in the first quarter of 2014-15.

Dec. 1 wheat stocks were up 19% from last year and 17 million bu. more than anticipated. Of the total stocks, on-farm supplies totaled 571 million bu. (up 13%) and off-farm stocks were 1.50 billion bu. (up 21%). Implied use during the second quarter of the 2016-17 marketing year was 472 million bu., up 34% from the same period last year.

 

Winter Wheat Seedings

All winter wheat: 32.383 mil. acres; trade expected 34.137 mil. acres
-- compares to 36.137 mil. acres in 2016
HRW: 23.3 mil. acres; trade expected 24.954 mil. acres
-- compares to 26.586 mil. acres in 2016
SRW: 5.68 mil. acres; trade expected 5.662 mil. acres
-- compares to 6.020 mil. acres in 2016
White winter: 3.37 mil. acres; trade expected 3.473 mil. acres
-- compares to 3.531 mil. acres in 2016

All winter wheat seedings are estimated down 3.754 million acres from last year and 1.754 million acres less than the average pre-report estimate. HRW plantings fell nearly 3.3 million bu. from 2016 and came in nearly 1.7 million bu. less than anticipated. SRW plantings were down 340,000 acres from last year and virtually in line with expectations. White winter wheat acres dropped 161,000 acres from 2016 and were down 103,000 acres from the average pre-report trade estimate.

 

U.S. carryover

Corn: 2.355 billion bu. for 2016-17; down from 2.403 billion bu. in December
Beans: 420 million bu. for 2016-17; down from 480 million bu. in December
Wheat: 1.186 billion bu. for 2016-17; up from 1.143
billion bu. in December
Cotton: 5.0 million bales for 2016-17; up from 4.8 million bales in December

USDA's total corn supply forecast declined 73 million bu. from last month on the smaller crop estimate and a 5-million-bu. increase in imports, which are now projected at 55 million bushels. On the usage side of the 2016-17 corn balance sheet, USDA lowered its feed and residual use forecast by 50 million bu. (to 5.6 billion bu.) and raised food, seed and industrial use by 25 million bu. (to 6.76 billion bu.), with all of that coming in corn-for-ethanol grind (now projected at 5.235 billion bu.). That resulted in a 48-million-bu. reduction to 2016-17 corn ending stocks. USDA raised the on-farm average cash corn price to a range of $3.10 to $3.70, up a nickel on both ends of the range from last month.

For soybeans, USDA lowered total supply by 60 million bu. on the smaller crop estimate and a 5-million-bu. reduction to imports, which are now projected at 25 million bushels. On the demand side of the balance sheet, USDA increased residual "use" by 1 million bu. (to 33 million bu.). That resulted in carryover declining 60 million bu. from December. USDA now forecasts the national average on-farm cash soybean price at $9.00 to $10.00, up 30 cents on the bottom end and down 20 cents on the top end of the range from last month.

The wheat ending stocks forecast was raised 43 million bu. from last month. USDA lowered projected feed and residual use by 35 million bu. (to 225 million bu.) and dropped seed use by 8 million bu. (to 61 million bu.) to reflect the smaller winter wheat seedings. USDA now projects the 2016-17 national average on-farm cash wheat price at $3.75 to $3.85, up 15 cents on the bottom end and up a nickel on the top end of the range from December.

For cotton, USDA increased total supply by 440,000 bales as a result of its bigger crop estimate. On the demand side, projected exports were raised 300,000 bales (to 12.5 million bales) and unaccounted "use" was lowered 60,000 bales (to -30,000 bales). That resulted in a 200,000-bale increase to projected carryover. USDA now projects the 2016-17 national average on-farm cash cotton price at 65 cents to 69 cents, up a penny on the bottom end and down a penny on the top end of the range from last month.

 


Global carryover

Corn: 220.98 for 2016-17; down from 222.25 MMT in December
-- compares to 210.01 MMT in 2015-16

Beans: 82.32 MMT for 2016-17; down from 82.85 MMT in December
-- compares to 77.19 MMT in 2015-16
Wheat: 253.29 MMT for 2016-17; up from 252.14 MMT in December
-- compares to 240.49 MMT in 2015-16
Cotton: 90.65 million bales for 2016-17; up from 89.15 million bales in December

-- compares to 96.89 million bales in 2015-16

 

Global production highlights

Argentina beans: 57.0 MMT for 2016-17; compares to 57.0 MMT in December
-- compares to 56.8 MMT in 2015-16
Brazil beans: 104.0 MMT for 2016-17; compares to 102.0 MMT in December
-- compares to 96.5 MMT in 2015-16

Argentina wheat: 15.0 MMT for 2016-17; compares to 14.4 MMT in December
-- compares to 11.3 MMT in 2015-16
Australia wheat: 33.0 MMT for 2016-17; compares to 33.0 MMT in December
-- compares to 24.5 MMT in 2015-16
China wheat: 128.85 MMT for 2016-17; compares to 128.85 MMT in December
-- compares to 130.19 MMT in 2015-16
Canada wheat: 31.7 MMT for 2016-17; compares to 31.7 MMT in December
-- compares to 27.59 MMT in 2015-16
EU wheat: 144.32 MMT for 2016-17; compares to 143.97 MMT in December
-- compares to 160.01 MMT in 2015-16
Russia wheat: 72.5 MMT for 2016-17; compares to 72.0 MMT in December
-- compares to 61.04 MMT in 2015-16
FSU-12 wheat: 131.93 MMT for 2016-17; compares to 131.43 MMT in December
-- compares to 118.24 MMT in 2015-16
China corn: 219.55 MMT for 2016-17; compares to 219.55 MMT in December
-- compares to 224.63 MMT in 2015-16
Argentina corn: 36.5 MMT for 2016-17; compares to 36.5 MMT in December
-- compares to 29.0 MMT in 2015-16
South Africa corn: 13.0 MMT for 2016-17; compares to 13.0 MMT in December
-- compares to 7.9 MMT in 2015-16
Brazil corn: 86.5 MMT for 2016-17; compares to 86.5 MMT in December
-- compares to 67.0 MMT in 2015-16
China cotton: 22.0 mil. bales for 2016-17; compares to 21.0 mil. bales in December
-- compares to 22.0 mil. bales in 2015-16