USDA's World Agricultural Supply and Demand Estimates (WASDE) for November featured few major surprises. However, the lower-than-expected ending stocks, along with the lower yield and production, combined to send the oversold soy market sharply higher. Corn and wheat were mostly neutral to friendly but managed to rally in sympathy with soy.
Ahead of the November WASDE report, Dow Jones' pre-report estimate had been looking for higher yield and production and lower ending stocks than seen in the October report, which is what we got. Expecting a yield of 176.8 bushels per acre (bpa), with production of 15.040 billion bushels (bb), the numbers came out a bit higher than that. Corn yield was revised higher to a record 177 bpa, up .5 bpa, while production moved up to 15.062 bb, a gain of 43 million bushels (mb). Harvested acres were left unchanged from October, at 85.1 million acres. Corn used for ethanol was raised 50 mb to 5.250 bb, and this could still end up being more than 100 mb understated when all is said and done. The net effect was that corn ending stocks moved 7 mb lower to 1.493 bb -- just above the 1.482 bb that traders had expected prior to the report. Some key yield changes were recorded in Minnesota and South Dakota, which were 3 to 4.5 bpa higher, while both Indiana and Illinois both declined versus October.
On the world front, global ending stocks of corn rose by a higher-than-expected 2.5 million metric tons (mmt) to 304.42 mmt (11.98 bb). Some notable changes included Argentine corn production falling by 1.5 mmt to 54.5 mmt (2.15 bb), European Union's corn crop increasing by 1.55 mmt and the United States production up by 1.1 mmt (43 mb).
Corn futures, which had been trading 3 to 4 cents lower just before the report was released, ended up a solid 4 1/2 cents higher by the close, but had traded up over 12 cents at one point. The corn report can only be described as neutral for the U.S., while slightly bullish for the world.
It was the soybean market that perhaps saw the biggest surprise of the report. With traders expecting a higher bean yield and production, along with a sizable 40 mb jump in ending stocks, USDA came back with a much different result. In fact, soybean yield fell by .3 bpa to 51.2 bpa, with production declining 23 mb to 4.425 bb. Soybean exports were lowered by 40 mb to 2.050 bb. The net effect was an ending stocks number of 340 mb -- up 20 mb from October but 20 mb lower than Dow Jones' pre-report estimates had projected. The season average price for soybeans was lowered to $12.10 per bushel from $12.35 in October. Without export sales picking up, U.S. soybean exports could still be overstated.
Globally, there were few changes from October, with world ending stocks of soybeans falling to 103.78 mmt (3.8 bb) from 104.6 mmt in October and about 2 mmt lower than the pre-report estimates. Buried within that number was a fall of 1.1 mmt in world soy production, with the most notable change a decline of 1.5 mmt in Argentina's soy production to 49.5 mmt (1.82 bb).
Prior to the report, January soybeans were trading down about 4 cents and finished up 21 1/2 cents by the close. The soybean futures market had been very oversold coming into the report, likely leading to the stronger reaction.
Wheat was perhaps the least consequential part of the November WASDE report. Dow Jones' pre-report estimates were looking for only a minor change in U.S. ending stocks for 2021-22 and that is what they got. Ending stocks rose by 3 mb to 583 mb, just slightly above expectations. There were a few minor changes within the balance sheet, with wheat imports declining by 10 mb and exports of wheat lowered by 15 mb to 860 mb to account for the slow pace of exports thus far. There were some notable by-class changes, with hard red winter stocks tightening to 299 mb from 311 mb in October. Hard red spring stocks moved the opposite way, rising by 14 mb from 113 mb to 127 mb and white wheat stocks rose by 5 mb to 46 mb.
Global changes to wheat were minor, with ending stocks about 1.4 mmt lower than in October, tightening an already tight major exporter balance sheet. EU's wheat crop fell by 1 mmt to 138.40 mmt (5.08 bb), while Russia's wheat crop was raised by 2 mmt to 74.5 mmt (2.74 bb). Global wheat imports were raised by 3 mmt, to over 201 mmt (7.38 bb). Major exporter stocks-to-use was reported to have fallen to just 12.1% compared to 12.5% a month ago.
Kansas City December wheat futures were trading up just a penny before the report and ended up closing 12 3/4 cents higher, as wheat remains the bullish leader of the ag futures big three.
Wheat remains the bullish leader and the November WASDE further emphasized the continued tightening world supply situation for wheat. Soybeans were the big surprise and, though not ultra-bullish, the market was caught short, resulting in the sharp gain. All eyes will be on China demand and South American weather in the next few months. If China does not return to buy in a big way, we may see even more of a decline in U.S. soy exports and a further increase in stocks. The corn market, despite facing a record corn yield and sizable crop, closed report day higher.
In a year when there were certainly weather challenges, the fact that corn turned in a record yield was surely glossed over on Tuesday.
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Dana Mantini can be reached at email@example.com
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