USDA Reports Review

The January 2022 USDA and World Agricultural Supply and Demand Estimates (WASDE) reports held little fanfare for traders, a huge change from a year ago when corn went soaring to limit gains and soybeans rallied 50 cents.

Wednesday's widely anticipated reports did not change the narrative much for corn, but the 7.2 million metric ton (mmt) (265 mb) reduction in world ending soy stocks had traders thinking there would be more bullish fodder down the road. Soybeans, in the half hour after the report release, rallied more than 20 cents off the lows, finishing there. The report for wheat was mildly bearish for both the U.S. and world.

Let's look at some of the changes in both U.S. and world numbers on the USDA/WASDE Jan. 12, 2022, reports, starting with corn.

CORN

Coming into the all-important January USDA and WASDE reports, which featured final production, yield and acreage numbers, along with Dec. 1 stocks, traders had expected only a modest change in corn. They got a bit more than they bargained for. But, in the end, it was not a big market mover.

Starting with production, with traders looking for a yield of 177.1 bushels per acre (bpa) and a crop of 15.062 billion bushels (bb), the end result was a crop of 15.115 bb -- up 53 million bushels (mb) from December, with a final yield of a record-large 177 bpa. Harvested acres figured 300,000 acres higher than December at 85.4 million acres. Ending stocks for U.S. corn were revealed to be much higher than expected at 1.540 bb. Traders were expecting a lower production number than that (14.85 bb). On the domestic balance sheet, food, seed and industrial corn use rose by 80 mb, with a rise in corn for ethanol accounting for 75 mb of that. Corn exports were dropped by a like amount (75 mb) to 2.425 bb. I would say the export decline was a bit of a surprise and weighed on corn values. There were no changes in China demand.

December 1 corn stocks were 11.647 bb -- up 3% versus a year ago. Implied September-November disappearance was 4.7 bb, compared to 4.74 bb a year ago. The stocks number was 64 mb above the average trade estimate of 11.583 bb. On-farm stocks were up 3% at 7.23 bb, with off-farm stocks up 4% at 4.4 bb.

World corn ending stocks fell to 303.07 million metric tons (mmt) (11.93 bb), compared to 305.54 mmt (12.03 bb) in December. The major reason for the fall is the expected reduction in Brazil corn production, which was lowered to 115 mmt (4.53 bb) from 118 mmt.

Corn had a muted response to the report, with values down 3 cents prior to the report and March corn finishing down 2 cents to end the day. The focus will likely return to South American weather in the coming days and weeks.

SOYBEANS

U.S. soybean production was raised by 19 mb to 4.44 bb with a yield of 51.4 bpa. Soybean ending stocks rose to 350 mb -- close to where Dow Jones' trader survey had anticipated (349 mb). Soybean yield at 51.4 bpa, was raised 0.20 bpa from December and was a half-bushel higher than a year ago. The U.S. portion of the report was neutral for soybeans.

December 1 soybean stocks of 3.15 bb were 7% higher than a year ago and about as the trade had anticipated. September-November implied disappearance figured 1.54 bb, down a hefty 14% versus a year ago. On-farm soy stocks were up 16% at 1.52 bb, while off-farm stocks fell by 1% from a year ago at 1.63 bb.

All attention was on South American production changes, which saw USDA be a bit more aggressive than is normal in cutting the Brazilian soy production by 5 mmt to 139 mmt (4.53 bb) and 1.5 mmt below that of CONAB, Brazil's crop agency. Argentina's soy crop was reduced by 3 mmt to 46.5 mmt -- a reasonable expectation considering the heat and dryness that continue to plague the area. Paraguay soy production was sliced another 1.5 mmt to 8 mmt. World ending stocks of soybeans fell by a greater-than-expected 7.2 mmt (265 mb) from December to 95.2 mmt (3.5 bb). Traders had anticipated a more modest decline of world stocks to 99.3 mmt. There were no changes for China on the demand side.

March soybeans were trading down a nickel prior to the report release and ended up closing 12 3/4 cents higher for the day. While it certainly depends on forecast rains falling by the weekend and early week, it is likely traders are anticipating a further fall in South American supplies, as southern Brazil and Argentine crops continue to suffer this week.

WHEAT

Coming into the report, only a modest bump in U.S. ending stocks was expected. According to the Dow Jones survey, traders had expected U.S. ending stocks to rise to 610 mb. However, after USDA had cut feed and residual by 25 mb, lowered imports by 10 mb and reduced exports by 15 mb to 825 mb, ending stocks rose by a much greater-than-expected 30 mb to 628 mb. That is still the lowest ending stocks since 2016-17.

Wheat stocks on Dec. 1 were a lower than expected 1.390 bb -- down 18% from 2020. The trade had expected stocks to be 1.446 bb. On-farm stocks of 273 mb were down 43%, while off-farm stocks were down 8% at 1.12 bb. September-to-November disappearance figured 348 mb, down a hefty 16% from last year. Durum stocks on Dec. 1 were down 30% at just 43 mb.

On the world front, we saw only minor changes, with Argentine wheat production raised 500,000 mt to a record-large 20.5 mmt (753 mb). That is still shy of the Rosario Exchange estimate, which has the crop at 21.8 mmt (801 mb). The EU wheat crop was raised by 200,000 mt to 138.9 mmt (5.1 bb). There was no further increase in Australian production, which many had anticipated. World ending stocks of wheat rose by 1.8 mmt to 279.5 mmt (10.27 bb). That is primarily the result of a cut in U.S. feed usage, declining by 680,000 mt, and the Argentine and EU crop increases.

The wheat market was hardly influenced by the report, but it was clearly a bit bearish for wheat. Prior to the report, Kansas City March was trading down 5 cents and ended up closing down 13 3/4 cents for the day.

FINAL THOUGHTS

Although not a big game changer on Wednesday, the January USDA and WASDE reports had some minor surprises. Traders will now likely refocus on South American and Southern Plains weather outlooks, where expanding drought is still plaguing both areas. Secondarily, the bean and wheat markets will focus on expanding export sales, with both markets still lagging USDA expectations and last year's totals.

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

Follow Dana Mantini on Twitter @mantini_r

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