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Little excitement in today’s USDA numbers

Conclusion, boring report. Santa, back to work.

Today’s report was vanilla and boring. No big changes that sparked huge price movement in either direction. Shortly before the report corn was up 3 cents, soybeans up 1 cent, with wheat up 8 cents. At 12:15 corn was unchanged, soybeans were down 3 cents, and wheat was up 6 cents.

If you were looking for drastic changes today, you were certainly disappointed.

The question is: Will this USDA report day be bearish, with Santa bringing lumps of coal for grain producers? Or will it be bullish, with Santa bringing lots of presents of higher prices?  

There certainly are lots of news tidbits that have been floating around for weeks. They would include Argentina and its election, China, weather in South America, U.S. production reports, and U.S. grain exports to include just a few.

Corn ending stocks were 1.785 billion bushels, up 25 million bushels from November. Soybean ending stocks were 465 million bushels, unchanged from the last report. Wheat ending stocks were unchanged at 911 million bushels. World ending stocks of corn were down and world ending stocks of soybeans were down, both in very small amounts. World ending stocks of wheat were higher. No huge surprise there.

The biggest changes took place with the corn table today. Ending stocks up 25 million bushels, corn exports reduced by 50 million bushels, corn used for ethanol increased 25 million bushels.

This was predicted to be a pretty boring USDA report day. There were not any production numbers or yields for U.S. corn and soybeans to be released today. With grain exports trending below those of a year ago, ideas of slightly higher corn and wheat ending stocks are present. Corn exports were expected to decline 50 to 100 million bushels while corn used for ethanol was thought to increase that same amount. The final U.S. 2015 corn and soybean production and yields will be released with the Jan. 12 report. On that same day, U.S. grain stocks as of Dec. 1, 2015 will be released. 

The election of Mauricio Marci as the next president in Argentina has dominated the news for the past three weeks. It brings much uncertainty, yielding lots of price volatility in recent weeks. The runoff election on Nov. 23 is ushering in a new era of government in Argentina. Argentina has seen a struggling economy for years, some would say decades. Rampant inflation has been dominant for years. The current president, Christina Fernandez de Kirchner has been in office for eight years. She is not exiting quietly with her political appointees refusing to vacate their positions. Lots of money is being spent during her last days as president. Mauricio Marci is a strong advocate of business, a far cry from the strong threads of socialism currently running through Argentina.

Marci has stated he would reduce export taxes on grains. How much and for which grains is a huge unknown. He takes over the reins as president on Dec. 10. Those taxes have long been a festering sore for Argentina’s farmers. The taxes have formerly been a strong incentive for Argentina’s farmers to hold onto nearly 18 million tons of unsold soybeans as they hoped some kind of change was around the corner. In recent weeks Marci has floated about the idea of reduced export taxes, though the amount appears to be uncertain. In addition, there has been strong talk that Argentina would devalue its currency very shortly. Those two ideas from Argentina of lowering export taxes and the currency devaluation pushes more money into the pockets of Argentina’s farmers. U.S. producers are on edge that soybeans will soon be flooding the market, pushing soybeans to new contract lows. The potential movement of Argentina soybeans, perhaps a lot of soybeans, has raised the notion that soybeans could reach $8 in coming weeks.

China’s economy is also in the headlines. Their economy has been struggling, although a struggling economy in China translates into just 6% growth. That is something the U.S. would kill for when we have been crawling along at a pace of just 1% to 2% growth for years. China has been stimulating the economy, pumping huge amounts of money into the banking system, just like the U.S. and Europe has been doing for years. China also imported a record amount of US ethanol in October.

Weather uncertainty hits us on two fronts. First, in Brazil with two huge extremes. Southern Brazil is too wet and has been wet for weeks. Northern Brazil is too dry. Some weather trackers like World Weather are forecasting for the dry conditions to continue in northern Brazil in coming weeks. Second, is El Nino.

The current El Nino is the strongest for the past 20 years. For years there have been correlations for El Nino to translate into weather changes for the next US growing season. Some are already that this El Nino is a “Monster,” that it will influence strong weather events for the next decade. That is something to grasp and hang onto.

Export loadings for corn year to date are 285 million bushels, last year at the same time were 379 million bushels. Soybean exports to date are 802 million bushels; last year was 872 million bushels.

Just when you thought you were suffering from information overload, allow me to pile on. Here is what the market will be watching in coming days. Dec. 10, the new president in Argentina will take office. Dec. 14 will provide additional details on upcoming policy changes in Argentina. Those changes would include the likely lowering of export taxes on grains along with the devaluation of their currency. Dec. 16 is when the U.S. Fed meets to discuss policy. It has long been anticipated that meeting would detail the raising of U.S. interest rates.

With no production number or yields with this report, it will be dismissed even quicker than previous reports. Any changes in Argentina policy will dominate price activity in coming days and weeks.

Merry Christmas and a Happy New Year!

 

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