Post-USDA Report Analysis

The January 2025 World Agricultural Supply and Demand Estimates (WASDE) report was a bullish shocker. The report resulted in a sharp and unexpected reduction in corn and soybean yields, production and ending stocks that few saw coming.

The report revealed a 3.8-bushel-per-acre (bpa) drop in corn yield to just 179.3 bpa. When I say "just," it is still a record-large yield and compares to last year's 177.3 bpa. However, with traders surveyed by Dow Jones ahead of the report looking for a modest five-tenths of a bushel drop in yield from December's estimate to a still-hefty 182.6 bpa, the corn balance sheet would be sharply different now. Ending stocks fell 198 million bushels (mb) from December to 1.540 billion bushels (bb). While that's not a shortage of corn, it can no longer be called a burdensome carryout.

In soybeans, the change was a bit milder, but traders had expected a mere one-tenth bushel-per-acre decline in soybean yield, and instead, it was dropped by 1 full bushel, sending production down a hefty 95 mb from December. Ending stocks on U.S. soybeans would now be a comfortable 380 mb rather than the burdensome 470 mb ending stocks from a month ago -- down 90 mb.

The net result of the bullish report had March corn finishing nearly 15 cents higher and March soybeans closing more than 26 cents higher on Friday and continuing the strength early Monday.

In my mind, the reaction to the bullish report presents a great opportunity for producers to not only get some remaining old-crop corn and soybeans sold, but to look at marketing some new-crop production as well. I will focus only on corn marketing ideas in this piece.

Even with the reduction in U.S. supplies, it's not like the world is devoid of adequate corn and soy stocks, although world corn stocks are much more precarious. In fact, even with the jury still out on Argentine corn and soy crops, current estimates for combined corn production for Brazil and Argentina have those two producing about 250 mb to 275 mb more than last year, with combined soybean production more on the order of an additional 750 mb to 850 mb more than last year. The latter assumption, of course, figures that the short-term Argentine dryness will be just that -- short term.

Just above Friday's March corn close at $4.70 1/2 rests some major chart resistance ranging from $4.75 all the way up to $4.90. Assuming the U.S. balance sheet is all set, and we are already close to 90 cents above the contract low, I believe somewhere in the next 10-15 cents, if we even get that, would be a good place to market some remaining old-crop corn.

On the new-crop side, December 2025 corn futures closed just 3 1/4 cents higher post-report, and that is likely due to the South American effect that we talked about. The December corn chart has some positive signals, with a clear double bottom and trading above key moving averages. However, with the prospect for sharply higher South American production -- granted there is a long time to go before that is assured -- and the prospect that U.S. corn acres could increase by 2 million to 4 million acres, it could be a good play to sell some new-crop cash corn up here.

Major chart resistance on new-crop corn (see chart accompanying this column) looks to be up about 15 to 25 cents from where we are today ($4.50 1/4). With an outside chance that December corn could get into that area of $4.75-$4.80, I would look at possibly selling a $4.80 December call, which on Monday is priced at 27 cents, and in turn get some protection to the downside just under the recent low, by buying a $4.20 put option for 21 cents. That's a net credit of 6 cents on the options. Should the market rise above the $4.80 level, you could get sold and unwind (sell) the long put at that time. You could just buy the put and let the cash run in the event it goes even higher. But why not capitalize on collecting the call premium as a bonus to pay for your put and the protection it provides? These transactions can be done through your local grain elevator or the company you typically sell to. One might be inclined to sell no more than 20% of anticipated production in case that South American dryness extends beyond next week.

With the prospect for South American corn supplies to be sharply higher if weather cooperates and with China demand weaker after their record-large crop, I consider the recent rally a gift. One other thing to keep in mind is that funds, after Friday's buying binge, could now be net-long close to 250,000 contracts of corn.

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Note: Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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