Editor's Note: This story was originally published on Thursday, Nov. 9, with the wrong information. It was updated the morning of Friday, Nov. 10, with the correct information.
The USDA World Agricultural Supply and Demand Estimate (WASDE) for November featured higher-than-expected yield and production changes for corn and soybeans, sending those markets sharply lower, with corn forging a new low. Ending stocks on all three major ag commodities were increased. The corn production increase was nearly all offset by higher usage figures. The lower bean values came despite two days of combined new sales of 96 million bushels (mb) of U.S. beans to China and unknown destinations.
Corn futures were already trading lower prior to the November USDA report was released, trading more than a nickel lower just before 11 a.m. CST. However, once the report was released, the higher yield and production numbers led to increased selling. The 1.9 bushel-per-acre (bpa) gain in yield to 174.9 bpa from 173 bpa in October resulted in a record-large U.S. production of 15.234 billion bushels (bb), eclipsing the 2016 record by close to 90 mb. The revised production was about 158 mb higher than the Dow Jones trade estimate. The 170 mb increase in production from October was expected by few in the trade. If it were not for an increase in corn usage, the result could have been much more bearish. Due to the larger crop, USDA chose to increase feed and residual by 50 mb, corn for ethanol usage by 25 mb and exports by 50 mb. Those changes would offset much of the increased supply, but corn ending stocks still rose by 45 mb to a comfortable 2.156 bb. A larger yield was reported for most of the major producing states, with eastern Corn Belt yields improving the most.
On the world side, there were only minor changes, but the resulting ending stocks number of 315 million metric tons (12.4 bb) was not only 2.6 mmt (102 mb) higher than in October but is also a five-year high. Some of the changes that led to that result were an increase in Russian production by 1.4 mmt and Ukraine production by 1.5 mmt. In additions, Ukraine exports rose by 500,000 mt to 20 mmt (787 mb), and Russian exports increased by 1.1 mt. Canada and Mexico were forecast to import 1 mmt and 600,000 mt more than in October, respectively.
While the corn changes were modestly bearish, with a comfortable carryout of near 2.2 bb, trade focus is now likely to turn again to South America, where Brazil is facing an abnormal dichotomy, characterized by the ongoing hot and dry weather in the central and north and more unwanted rain in the south. CONAB on Thursday lowered their corn estimate for Brazil to just 119 mmt (4.68 bb) -- a full 10 mmt (394 mb) less than the USDA is currently carrying.
Although the November report changes were far milder on soybean yield, production and ending stocks, traders took the slightly bearish results to heart, selling January beans off sharply. Prior to the report, soy futures were trading more than a dime lower, but traders more than doubled that by the close. The modest increase in soybean yield by 0.3 bpa and production by 25 mb sent ending stocks up by 25 mb as well, with no other changes to the domestic balance sheet. The resulting 245 mb ending stocks number, while still tight, led to increased selling. On a side note, the soybean oil ending stocks, at 1.577 billion pounds, were down 159 million pounds from the October estimate. Despite that the season average price for bean oil was dropped 2 cents to 61 cents per pound to account for the recent price plunge in bean oil futures.
On the global front, there were few notable changes in the world numbers including South America, following the Argentine drought and the recent heat, dryness and heavy rain likely compromising Brazil production. The USDA does not typically change South American production this early, as Brazil soy planting is less than 50% complete. A few notable changes is China's crush, which rose by 1 mmt to 98 mmt (3.6 bb). Beginning stocks in China were reduced 3 mmt (110 mb) and ending stocks fell by 3.5 mmt from October, and beginning and ending stocks in Brazil were more than 2 mmt higher, due to revisions higher in the 2021-22 and 2022-23 production. World ending soy stocks were expected to be unchanged at 115.6 mmt and instead were forecast to fall to 114.5 mmt (4.2 bb).
As in corn, the soybean market will again turn most of its attention to Brazil's weather in the next few months. The price reaction to Thursday's report may have been an overreaction, especially since, in the past two days, U.S. soybean exporters have sold nearly 100 mb combined to China and unknown.
Going into the November WASDE report, traders looked for little change in the U.S. wheat supply and demand balance sheet. They did get a minor change, with an increase in imports of 10 mb and a decrease in use for food of 4 mb, resulting in an ending stocks number of 684 mb -- just 14 mb above October and expectations. Although that was just modestly bearish, the KC wheat market had already been trading down 7 1/2 cents prior to the report, and finished close to that, down 7 3/4 cents.
Notable changes came on the world side, but the combination of those did not change the overall world supply and demand all that much. World ending wheat stocks rose to 258.7 mmt (9.5 bb) and up just 600,000 mt from October. Some of the notable revisions were an increase in Russian production by 5 mmt to 90 mmt (3.3 bb), and more in line with other analysts and Russia, and a decrease in Argentine wheat production by 1.5 mmt to 15 mmt (551 mb), and that may still be too high by 1 to 2 mmt following a drought. India, Kazakhstan, and Brazil production were all revised lower, with India dropping 3 mmt to 110.5 mmt (4.06 bb), Kazakhstan down 1 mmt and Brazil 400,000 mt lower. Lower exports for Argentina and India, and higher exports for Ukraine were also changes. Argentine wheat exports fell by 1.5 mmt to 10 mmt (367 mb), and Ukraine exports were increased by 1 mmt to 12 mmt (441 mb). China wheat imports rose by 1 mmt to 12 mmt (441 mb).
So, overall, the wheat supply and demand for both the U.S. and the world survived the report with only minor changes, which would be termed neutral.
The November WASDE report featured perhaps the largest surprise in corn, where new varieties and some late-season rain brought better-than-expected results to a crop that had suffered early on. It remains that the corn balance sheet is much looser than in prior years, while soybeans -- though still tight -- got a bit more breathing room. The focus will now undoubtedly move back to Brazil weather, and outside political and macro developments.
Dana Mantini can be reached at firstname.lastname@example.org
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