USDA Reports Review

Although USDA's Jan. 10 reports showed yield, production and ending stocks at higher levels than traders had estimated, the markets were able to shake off early weakness and finish higher, well above the lows, with wheat and corn leading the way. Wheat stocks fell modestly from expectations, and winter wheat seeding came in about as expected at 30.8 million acres, the second-smallest area on record.

What could have been a bearish reaction for corn and soybeans actually wasn't, with corn, soybeans and wheat closing report day 8 to 10 cents above the daily lows. The focus will now likely shift to the potential demand implications of the soon-to-be-signed U.S.-China trade deal.

Here's a closer look at some of the changes in both U.S. and world numbers from the Jan. 10 reports:

CORN

U.S. corn production came in at a larger-than-expected 13.692 billion bushels (bb), 31 million bushels (mb) higher than in December, as yield was raised to 168 bushels per acre (bpa) from 167 bpa -- 2.1 bpa higher than the average pre-report estimate. Harvested acres fell a less-than-expected 300,000 acres to 81.5 million acres (ma), down from 81.8 ma in December, but higher than the 81.3 ma estimated.

Several changes in the 2019-20 corn balance sheet were made. Beginning stocks of corn were 107 mb higher, the result of upward revisions on both on-farm and off-farm stocks. Food, seed and industrial usage was revised lower by 20 mb, while feed and residual was increased by 250 mb to 5.525 bb, based on disappearance in the September-through-November quarter. Exports were lowered by 75 mb to 1.775 bb, accounting for the slow pace of sales and shipments through December. Corn ending stocks in the U.S. were decreased 18 mb to 1.892 bb, but still far above the 1.753 bb average pre-report estimate.

Dec. 1 quarterly stocks were pegged at 11.389 bb, compared to 2.114 bb in September and 11.937 bb in December 2018. The average trade estimate was 11.417 bb prior to the report. World ending stocks of corn were reduced to 297.81 million metric tons (mmt) compared to 300.6 mmt in December and close to the average pre-report estimate of 297.3 mmt.

The National Agricultural Statistics Agency (NASS) came out with a statement that they will resurvey farmers in Michigan, Minnesota, Wisconsin, North Dakota and South Dakota who still have standing crops, so we could see further revisions down the road.

SOYBEANS

The U.S. soybean crop was estimated to be 3.558 bb, 8 mb higher than the December reports showed and 39 mb above the average pre-report estimate. This can be explained by a higher yield of 47.4 bpa (compared to 46.9 bpa from the December report). The average pre-report trade estimate had yield pegged at 46.6 bpa.

Harvested acres were reduced 600,000 to 75 ma even though pre-report estimates expected acreage to remain at 75.6 ma. Ending stocks, however, did remain unchanged at 475 mb.

Dec. 1 stocks came in at a higher-than-expected 3.25 bb, down sharply from 3.746 bb in December of 2018 but higher than the pre-report estimates of 3.179 bb.

At 96.67 mmt, world ending stocks of soybeans were roughly 1 mmt above pre-report estimates and slightly higher than the December reports. Argentine and Brazilian soybean production were left unchanged at 53 mmt and 123 mmt, respectively. China imports were left unchanged at 85 mmt, while China's crush was raised by 500,000 metric tons to 85 mmt. Obviously, there were no added China purchases accounted for from the soon-to-be-signed phase-one trade agreement. Some private analysts, such as China's own JC Intelligence, recently raised Chinese soy imports by 11 mmt, but the jury is still out on China's buying plans.

The season average soybean price for 2019-20 was raised by 15 cents per bushel to $9.00, reflecting stronger soybean oil prices. The soybean oil price forecast was raised 3 cents to 34 cents per pound. Lower production and increased demand in veg oil results in a projected 9% decline in veg oil stocks.

WHEAT

U.S. wheat ending stocks were lowered to 965 mb from 974 mb, which is the result of feed and residual use going up 10 mb, while seed usage fell by 1 mb. World wheat ending stocks moved lower to 288.08 mmt -- about as expected and just slightly lower than the record-large 289.5 mmt in December. Foreign wheat production fell by 1 mmt, with a 1 mmt reduction in Russia and a 500,000 mt reduction in Australia and a gain of 500,000 mt in the EU.

Quarterly Dec. 1 stocks were revealed at 1.83 bb, 88 mb lower than the trade had anticipated and down from December's 2.009 bb number. The stocks number on wheat was more bullish than the trade had expected.

Winter wheat seeding came out at 30.8 ma, very close to the average pre-report estimate of 30.7 ma. That is a 400,000-acre reduction from last year and the second-lowest U.S. acreage recorded since 1909. Hard red winter wheat acres, at 21.8 ma, were 300,000 lower than estimates, while soft red winter wheat acres were 540,000 acres more than expectations.

Dana Mantini can be reached at dana.mantini@dtn.com

Follow Dana Mantini on Twitter @mantini_r

(BE/AG)

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