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Reaction to Much-Anticipated Reports Not Quite What Expected


Typically, the January USDA reports, which were embedded in the February reports this year due to the partial government shutdown, are met with a volatile market reaction. That was not the case on Friday.

The grain markets reacted to the plethora of numbers with a shrug. March corn closed down 2 1/4 cents per bushel and December corn was down 1 cent. March soybeans closed up 1 1/4 cents and November soybeans were up 1 1/4 cents. March K.C. wheat closed down 2 cents, March Chicago wheat was up 4 cents and March Minneapolis wheat was up 4 cents.

As expected, in its Crop Production Annual Summary, USDA did reduce final yield and production for both corn and soybeans, with corn lower than expected (down 2.5 bushels per acre) and soybeans down less than a half bushel per acre. In its Winter Wheat Seedings report, USDA lowered winter wheat by a greater-than-expected amount to the lowest level since 1909, offset by higher U.S. ending stocks in the World Agricultural Supply and Demand Estimates (WASDE) report.

Here is a closer look at USDA’s latest estimates:

CORN

USDA lowered corn yield by 2.5 bushels per acre (bpa), from 178.9 bpa in December to 176.4 bpa. That was 1.2 bpa below the average trade guess and is one of the largest November-to-final changes in history. Final 2018 production was reported to be 14.420 billion bushels (bb), a 206-million bushel (mb) decline from December’s 14.626 bb estimate. Harvested acres were reduced by 100,000 to 81.7 million acres (ma). Offsetting much of the production shortfall was a 165 mb reduction in usage to 14.865 bb. The reduction was comprised of a 125 mb drop in feed and residual and another 40 mb drop in food seed and industrial (FSI). Of the FSI reduction, 25 mb was a reduction in corn used for ethanol.

Dec. 1 corn stocks were reduced by 616 mb from last year. U.S. corn ending stocks were at 1.735 bb — down 46 mb from December.

World corn ending stocks were increased slightly to 309.78 million metric tons (mmt) from 308.8 mmt. Brazilian corn production was left unchanged at 94.5 mmt, while Argentine corn production was raised 3.5 mmt to 46 mmt.

SOYBEANS

USDA lowered soybean yield to 51.6 bpa — down from 52.1 bpa and reduced final production to 4.544 bb, down 56 mb from 4.6 bb in December. There was a slight drop in harvested acres to 88.2 ma. U.S. soybean exports were dropped by 25 mb.

Dec. 1 soybean stocks were 3.736 bb — 49 mb above the average pre-report estimate and 575 mb more than last year. Ending stocks of soybeans in the U.S., at 910 mb, were down 45 mb from December, but still record large.

World soybean ending stocks were reduced by a hefty 8.6 mmt from December, at 106.72 mmt. Much of that came from South America, as Brazil’s soybean production was reduced by 5 mmt to 117 mmt, and Argentina’s soy production fell by 500,000 mt to 55 mmt. One notable change in world demand was a reduction in China imports of soybeans by 2 mmt to 88 mmt — a function of reduced crush and African swine fever.

WHEAT

USDA raised U.S. wheat ending stocks by 36 mb from the December estimate due to reduced feed and residual use and lower seed use. That ending stocks number is 1.010 bb versus 974 mb in December — the pre-report average trade estimate was 993 mb.

World ending stocks of wheat were down a modest 600,000 metric tons (mt) to 267.5 mmt. World production was increased by 1.3 mmt. Notably, Russia’s wheat production was raised by 1.6 mmt to 71.6 mmt.

In its Winter Wheat Seedings report, USDA revised winter wheat acreage downward to a much-smaller-than-anticipated 31.3 ma from 32.5 ma earlier, and also below the average pre-report estimate of 32 ma. That is said to be the lowest wheat acres since 1909. Of that total, hard red winter wheat acres are reported at 22.2 ma — down 700,000 from the last report. Soft red winter wheat acres, at 5.7 million, dropped 400,000 acres from the previous report. It is notable that Kansas acreage fell to 7.2 ma from 7.7 ma.

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

Follow him on Twitter at @mantini_r

Source: Dana Mantini, DTN

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