PF Reaction: USDA Reports Appease Bulls

Posted on Tue, 01/12/2021 - 12:24

Market reaction

Ahead of USDA's reports, corn futures were trading narrowly mixed, soybeans were mostly 10 to 16 cents higher, winter wheat was 8 to 11 cents higher, spring wheat was up around 4 cents and cotton futures were narrowly mixed.

All of these markets rocketed higher in the wake of the reports. Corn futures are up 20 to 25 cents, soybeans are 35 to 50 cents higher, winter wheat futures have rallied 24 to 30 cents, spring wheat futures are up 15 to 18 cents and cotton futures have climbed roughly 100 points.

 

Annual Production Summary

Corn: 14.182 billion bu.; trade expected 14.470 billion bu.
— compares to 14.507 billion bu. in November; 13.620 billion bu. in 2019
Beans: 4.135 billion bu.; trade expected 4.158 billion bu.
— compares to 4.170 billion bu. in November; 3.552 billion bu. in 2019
Cotton: 14.953 million bales; trade expected 15.660 million bales
— compares to 15.949 million bales in December; 19.913 million bales in 2019

USDA’s final 2020 corn crop estimate is down 325 million bu. from November and 288 million bu. below what traders anticipated. USDA trimmed harvested acres by 60,000 from November and noted there were still 330,000 acres left to harvest when its survey work was completed. USDA cut the national average corn yield by 3.8 bu. from November to 172.0 bu. per acre.

Compared with November, USDA lowered yields in Illinois (down 3 bu. to 192 bu. per acre), Indiana (down 2 bu. to 187 bu.), Iowa (down 6 bu. to 178 bu.), Michigan (down 6 bu. to 154 bu.), Minnesota (down 10 bu. to 192 bu.), Nebraska (down 4 bu. to 181 bu.), North Dakota (down 6 bu. to 139 bu.), South Dakota (down 3 bu. to 162 bu.) and Wisconsin (down 10 bu. to 174 bu.). USDA raised yields in Kansas (up 2 bu. to 134 bu.), Missouri (up 4 bu. to 171 bu.) and Ohio (up 3 bu. to 171 bu.). It’s unusual for USDA to make these type of big yield changes in the January crop report.

USDA’s final 2020 soybean crop estimate is down 35 million bu. from November and 23 million bu. below the average pre-report estimate. USDA raised harvested acres 29,000 from November and noted there were still 494,000 acres left to harvest when its survey work was finished. USDA lowered the national average soybean yield by 0.5 bu. from November to 50.2 bu. per acre.

Compared with November, USDA lowered yields in Iowa (down 1 bu. to 53 bu. per acre), Kansas (down 1.5 bu. to 40.5 bu.), Michigan (down 1 bu. to 47 bu.), Minnesota (down 2 bu. to 49 bu.), Nebraska (down 1 bu. to 57 bu.), South Dakota (down 1.5 bu. to 45.5 bu.) and Wisconsin (down 2 bu. to 51 bu.). USDA left yields unchanged in Arkansas (50 bu.), Indiana (58 bu.) and Ohio (54 bu.). USDA raised yields in Illinois (up 1 bu. to 59 bu.), Missouri (up 1 bu. to 50 bu.) and North Dakota (up 0.5 bu. to 33.5 bu.).

USDA’s cotton crop estimate is down nearly 1 million bales from last month and roughly 710,000 bales below the average pre-report estimate. USDA cut harvested acres by 303,000 from last month and the national average yield by 25 lbs. to 825 lbs. per acre.

USDA cut the Texas yield by 21 lbs. to 628 lbs. per acre. It cut the Georgia yield by 41 lbs. to 887 lbs. per acre.

 

Quarterly Grain Stocks

Corn: 11.322 billion bu.; trade expected 11.951 billion bu.
— compares to 1.919 billion bu. Sept. 1; 11.327 billion bu. Dec. 1, 2019
Beans: 2.933 billion bu.; trade expected 2.920 billion bu.
— compares to 525 million bu. Sept. 1; 3.252 billion bu. Dec. 1, 2019
Wheat: 1.674 billion bu.; trade expected 1.695 billion bu.
— compares to 2.158 billion bu. Sept. 1; 1.841 billion bu. Dec. 1, 2019

Corn stocks in all positions on Dec. 1, 2020, were 629 million bu. below the average pre-report trade expectations and were down 5 million bu. from year-ago levels. On Dec. 1, 7.05 billion bu. were stored on-farm, down 1% from year-ago. Off-farm stocks of 4.28 billion bu. were up 1% from year-ago. Implied disappearance in the first quarter of the 2020-21 marketing year was 4.78 billion bu., up 6% from the same quarter last year. Note: USDA revised its Sept. 1 corn stocks estimate 75.76 million bu. lower versus what was originally reported on Sept. 30.  

Soybean stocks in all positions on Dec. 1 of last year were 13 million bu. above the average pre-report trade estimate but down 9.8% from year-ago. On Dec. 1, on-farm stocks totaled 1.31 billion bu., down 14% from year-ago. Off-farm stocks of 1.62 billion bu. were down 6% from last year. Implied disappearance in the first quarter of the 2020-21 marketing year was 1.73 billion bu., up 43% from the same time last year.

Wheat stocks in all positions on Dec. 1, 2020, were 21 million bu. below the average pre-report trade estimate and down 9.1% from year-ago. On Dec. 1, on-farm wheat stocks totaled 483 million bu., down 7% from year-ago. Off-farm stocks of 1.19 billion bu. were down 10% from year-ago. Implied disappearance in the second quarter of the 2020-21 marketing year of 484 million bu. was down 4% from the same time last year.

 

Winter Wheat Seedings

All winter wheat: 31.991 mil. acres; trade expected 31.528 mil. acres
— compares to 30.415 mil. acres in 2020
HRW: 22.30 mil. acres; trade expected 22.140 mil. acres
— compares to 21.362 mil. acres in 2020
SRW: 6.23 mil. acres; trade expected 5.884 mil. acres
— compares to 5.564 mil. acres in 2020
White winter: 3.48 mil. acres; trade expected 3.514 mil. acres
— compares to 3.489 mil. acres in 2020

USDA’s all winter wheat seeding estimate is up 1.576 million acres from last year and 463,000 acres above the average pre-report estimate.

USDA’s HRW acreage estimate is up 938,000 acres from last year and 160,000 acres above the average pre-report estimate. Kansas producers planted 7.3 million acres to HRW wheat, up 700,000 acres from last year.

The SRW acreage estimate is up 666,000 acres from last year and 346,000 acres above the average pre-report estimate.

USDA’s white winter wheat seedings are virtually unchanged from last year and 34,000 acres less than traders expected.

 

U.S. carryover

Corn: 1.552 billion bu. for 2020-21; down from 1.702 billion bu. in December
Beans: 140 million bu. for 2020-21; down from 175 million bu. in December
Wheat: 836 million bu. for 2020-21; down from 862 million bu. in December
Cotton: 4.6 million bales for 2020-21; down from 5.7 million bales in December

Corn carryover at the end of the 2020-21 marketing year was cut 150 million bu. from last month and is 47 million bu. below the average pre-report trade estimate. On the supply side of the balance sheet, USDA slashed 325 million bu. from the crop estimate and also cut 76 million bu. from beginning stocks. The result is a 402-million-bu. cut to total corn supplies. On the demand side of the balance sheet, USDA cut estimated feed and residual 50 million bu. (to 5.65 billion), cut estimated food, seed and industrial use 100 million bu. (to 6.375 billion bu., with all of the cut coming out of corn-for-ethanol use, which is now put at 4.95 billion bu.). Estimated exports were also cut 100 million bushels (2.55 billion bu.). Total use was slashed 250 million bu. from last month. USDA now puts the national average on-farm cash corn price at $4.20, up 20 cents from last month.

*Note: USDA made adjustments to demand side of the 2019-20 marketing year balance sheet. Total supplies were unchanged at 15.883 billion bushels. Total use was increased 76 million bushels with all of the increase going to feed and residual use, which is now put at 5.903 billion bushels.

Soybean carryover was cut 35 million bu. from last month, but the tally was 1 million bu. above the average pre-report trade estimate. USDA cut total supplies by 14 million bu., with the 35-million-bu. cut to the crop partially offset by a 2-million-bu. increase in beginning stocks and a 20-million-bu. increase in estimated imports (to 35 million bu.). On the demand side of the balance sheet, USDA increased estimated bean crush 5 million bu. (to 2.2 billion) and increased estimated exports 30 million bu. (to 2.23 billion bu.) and cut estimated residual use 13 million bushels (to 22 million bu.). The result was a 21-million-bu. increase in estimated total soybean use. USDA puts the national average on-farm cash corn price at $11.15, up 60 cents from last month.

Wheat carryover for 2020-21 was cut 26 million bu. from last month and is 23 million bu. below the average pre-report trade estimate. USDA made no change to the supply side of the balance sheet. On the demand side, USDA increased estimated feed and residual use by 25 million bu. (to 125 million bu.) and increased estimated seed use 1 million bushels (to 63 million bu.). Exports were unchanged at 985 million bushels. USDA now puts the national average on-farm cash wheat price at $4.85, up 15 cents from last month.

Cotton carryover for the 2020-21 marketing year was cut 1.1 million bales from last month and is 790,000 bales below the average pre-report trade estimate. USDA cut the 2020 cotton crop by 1 million bales and total supplies by 990,000 bales (rounding). On the demand side of the balance sheet, USDA cut domestic use by 100,000 bales (to 2.4 million bales), which was more than offset by a 250,000-bale increase to estimated exports (to 15.25 million bales). Total use was up 150,000 bales from last month. USDA now puts the national average on-farm cash cotton price at 68 cents, up 3 cents from last month.

 

2020-21 global carryover (without China)

Corn: 92.16 MMT; down from 97.45 MMT in December
— compares with 102.48 MMT in 2019-20
Beans: 55.72 MMT; down from 58.84 MMT in December

— compares with 68.59 MMT in 2019-20
Wheat: 154.25 MMT; down from 155.32 MMT in December
— compares with 148.41 MMT in 2019-20
Cotton: 60.04 million bales for 2019-20; down from 61.25 million bales in December
— compares with 62.38 MMT in 2019-20

 

 

2020-21 global production highlights

Argentina beans: 48.0 MMT; compares with 50.0 MMT in December
—compares with 48.8 MMT in 2019-20
Brazil beans: 133.0 MMT; compares with 133.0 MMT in December
—compares with 126.0 MMT in 2019-20
Argentina wheat: 17.5 MMT; compares with 18.0 MMT in December
— compares with 19.76 MMT in 2019-20
Australia wheat: 30.0 MMT; compares with 30.0 MMT in December
— compares with 15.2 MMT in 2020-21
China wheat: 134.25 MMT; compares with 136.0 MMT in December
— compares with 133.59 MMT in 2019-20
Canada wheat: 35.18 MMT; compares with 35.18 MMT in December
— compares with 32.67 MMT in 2019-20
EU wheat: 135.8 MMT; compares with 135.80 MMT in December
— compares with 154.51 MMT in 2019-20
Russia wheat: 85.3 MMT; compares with 84.0 MMT in December
— compares with 73.61 MMT in 2019-20
Ukraine wheat: 25.5 MMT; compares with 25.5 MMT in December
— compares with 29.17 MMT in 2019-20
China corn: 260.67 MMT; compares with 260.0 MMT in December
— compares with 260.78 MMT in 2019-20
Argentina corn: 47.5 MMT; compares with 49.0 MMT in December
— compares with 51.0 MMT in 2019-20
Brazil corn: 109.0 MMT; compares with 110.0 MMT in December
— compares with 102.0 MMT in 2019-20
Ukraine corn: 29.5 MMT; compares with 29.5 MMT in December
— compares with 35.89 MMT in 2019-20
South Africa corn: 16.0 MMT; compares with 16.0 MMT in December
— compares with 16.0 MMT in 2019-20
China cotton: 27.5 million bales; compares with 27.5 million bales in December
— compares with 27.25 million bales in 2019-20